Correlation Between ICU Medical and Outset Medical

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

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

Diversification Opportunities for ICU Medical and Outset Medical

-0.75

Correlation Coefficient

ICU Medical  Outset Medical

Pay attention - limited upside

The 3 months correlation between ICU and Outset is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding ICU Medical and Outset Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outset Medical and ICU Medical 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 ICU Medical are associated (or correlated) with Outset Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outset Medical has no effect on the direction of ICU Medical i.e., ICU Medical and Outset Medical go up and down completely randomly.

Pair Corralation between ICU Medical and Outset Medical

Given the investment horizon of 90 days ICU Medical is expected to under-perform the Outset Medical. But the stock apears to be less risky and, when comparing its historical volatility, ICU Medical is 4.25 times less risky than Outset Medical. The stock trades about -0.06 of its potential returns per unit of risk. The Outset Medical is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Outset Medical on September 13, 2024 and sell it today you would earn a total of  70.00  from holding Outset Medical or generate 132.08% return on investment over 90 days.

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

ICU Medical  vs.  Outset Medical

ICU Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICU Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Outset Medical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICU Medical and Outset Medical

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

The idea behind ICU Medical and Outset Medical 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.