Correlation Between Venus Concept and STRATA Skin

Can any of the company-specific risk be diversified away by investing in both Venus Concept and STRATA Skin at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Venus Concept and STRATA Skin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Venus Concept and STRATA Skin Sciences, you can compare the effects of market volatilities on Venus Concept and STRATA Skin and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Venus Concept with a short position of STRATA Skin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Venus Concept and STRATA Skin.

Diversification Opportunities for Venus Concept and STRATA Skin

0.6

Correlation Coefficient

Venus Concept  STRATA Skin

Poor diversification

The 3 months correlation between Venus and STRATA is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Venus Concept and STRATA Skin Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATA Skin Sciences and Venus Concept is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Venus Concept are associated (or correlated) with STRATA Skin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATA Skin Sciences has no effect on the direction of Venus Concept i.e., Venus Concept and STRATA Skin go up and down completely randomly.

Pair Corralation between Venus Concept and STRATA Skin

Given the investment horizon of 90 days Venus Concept is expected to generate 3.78 times more return on investment than STRATA Skin. However, Venus Concept is 3.78 times more volatile than STRATA Skin Sciences. It trades about 0.01 of its potential returns per unit of risk. STRATA Skin Sciences is currently generating about -0.04 per unit of risk. If you would invest  396.00  in Venus Concept on December 28, 2024 and sell it today you would lose (117.00) from holding Venus Concept or give up 29.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Venus Concept  vs.  STRATA Skin Sciences

Venus Concept

Risk-Adjusted Performance

Weak

Over the last 90 days Venus Concept has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Venus Concept may actually be approaching a critical reversion point that can send shares even higher in April 2025.

STRATA Skin Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days STRATA Skin Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Venus Concept and STRATA Skin

The main advantage of trading using opposite Venus Concept and STRATA Skin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Venus Concept position performs unexpectedly, STRATA Skin can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in STRATA Skin will offset losses from the drop in STRATA Skin's long position.

The idea behind Venus Concept and STRATA Skin Sciences pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.