Correlation Between Varex Imaging and Penumbra

Can any of the company-specific risk be diversified away by investing in both Varex Imaging and Penumbra 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 Varex Imaging and Penumbra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Varex Imaging Corp and Penumbra, you can compare the effects of market volatilities on Varex Imaging and Penumbra 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 Varex Imaging with a short position of Penumbra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varex Imaging and Penumbra.

Diversification Opportunities for Varex Imaging and Penumbra

0.9

Correlation Coefficient

Varex Imaging  Penumbra

Almost no diversification

The 3 months correlation between Varex and Penumbra is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Varex Imaging Corp and Penumbra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penumbra and Varex Imaging 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 Varex Imaging Corp are associated (or correlated) with Penumbra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penumbra has no effect on the direction of Varex Imaging i.e., Varex Imaging and Penumbra go up and down completely randomly.

Pair Corralation between Varex Imaging and Penumbra

Given the investment horizon of 90 days Varex Imaging Corp is expected to generate 1.44 times more return on investment than Penumbra. However, Varex Imaging is 1.44 times more volatile than Penumbra. It trades about 0.15 of its potential returns per unit of risk. Penumbra is currently generating about 0.14 per unit of risk. If you would invest  1,248  in Varex Imaging Corp on August 30, 2024 and sell it today you would earn a total of  405.00  from holding Varex Imaging Corp or generate 32.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Varex Imaging Corp  vs.  Penumbra

Varex Imaging Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Varex Imaging Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Varex Imaging showed solid returns over the last few months and may actually be approaching a breakup point.

Penumbra

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Penumbra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varex Imaging and Penumbra

The main advantage of trading using opposite Varex Imaging and Penumbra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varex Imaging position performs unexpectedly, Penumbra 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 Penumbra will offset losses from the drop in Penumbra's long position.

The idea behind Varex Imaging Corp and Penumbra 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.