Correlation Between Establishment Labs and Axogen

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

By analyzing existing cross correlation between Establishment Labs Holdings and Axogen Inc, you can compare the effects of market volatilities on Establishment Labs and Axogen 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 Establishment Labs with a short position of Axogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Establishment Labs and Axogen.

Diversification Opportunities for Establishment Labs and Axogen

0.38

Correlation Coefficient

Establishment Labs  Axogen

Weak diversification

The 3 months correlation between Establishment and Axogen is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Establishment Labs Holdings and Axogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axogen Inc and Establishment Labs 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 Establishment Labs Holdings are associated (or correlated) with Axogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axogen Inc has no effect on the direction of Establishment Labs i.e., Establishment Labs and Axogen go up and down completely randomly.

Pair Corralation between Establishment Labs and Axogen

Given the investment horizon of 90 days Establishment Labs Holdings is expected to generate 1.31 times more return on investment than Axogen. However, Establishment Labs is 1.31 times more volatile than Axogen Inc. It trades about 0.03 of its potential returns per unit of risk. Axogen Inc is currently generating about 0.01 per unit of risk. If you would invest  4,466  in Establishment Labs Holdings on September 16, 2024 and sell it today you would earn a total of  134.00  from holding Establishment Labs Holdings or generate 3.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Establishment Labs Holdings  vs.  Axogen Inc

Establishment Labs

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Establishment Labs Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Establishment Labs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Axogen Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Axogen Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Axogen is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Establishment Labs and Axogen

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

The idea behind Establishment Labs Holdings and Axogen Inc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.