Correlation Between Varex Imaging and ReShape Lifesciences

Can any of the company-specific risk be diversified away by investing in both Varex Imaging and ReShape Lifesciences 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 ReShape Lifesciences 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 ReShape Lifesciences, you can compare the effects of market volatilities on Varex Imaging and ReShape Lifesciences 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 ReShape Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varex Imaging and ReShape Lifesciences.

Diversification Opportunities for Varex Imaging and ReShape Lifesciences

0.72

Correlation Coefficient

Varex Imaging  ReShape Lifesciences

Poor diversification

The 3 months correlation between Varex and ReShape is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Varex Imaging Corp and ReShape Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReShape Lifesciences 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 ReShape Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReShape Lifesciences has no effect on the direction of Varex Imaging i.e., Varex Imaging and ReShape Lifesciences go up and down completely randomly.

Pair Corralation between Varex Imaging and ReShape Lifesciences

Given the investment horizon of 90 days Varex Imaging Corp is expected to generate 0.35 times more return on investment than ReShape Lifesciences. However, Varex Imaging Corp is 2.82 times less risky than ReShape Lifesciences. It trades about -0.1 of its potential returns per unit of risk. ReShape Lifesciences is currently generating about -0.21 per unit of risk. If you would invest  1,668  in Varex Imaging Corp on November 28, 2024 and sell it today you would lose (359.00) from holding Varex Imaging Corp or give up 21.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Varex Imaging Corp  vs.  ReShape Lifesciences

Varex Imaging Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Varex Imaging Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ReShape Lifesciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days ReShape Lifesciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Varex Imaging and ReShape Lifesciences

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

The idea behind Varex Imaging Corp and ReShape Lifesciences 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .