Correlation Between IRIDEX and Establishment Labs

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

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

Diversification Opportunities for IRIDEX and Establishment Labs

-0.24

Correlation Coefficient

IRIDEX  Establishment Labs

Very good diversification

The 3 months correlation between IRIDEX and Establishment is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding IRIDEX and Establishment Labs Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Establishment Labs and IRIDEX 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 IRIDEX are associated (or correlated) with Establishment Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Establishment Labs has no effect on the direction of IRIDEX i.e., IRIDEX and Establishment Labs go up and down completely randomly.

Pair Corralation between IRIDEX and Establishment Labs

Given the investment horizon of 90 days IRIDEX is expected to under-perform the Establishment Labs. In addition to that, IRIDEX is 1.16 times more volatile than Establishment Labs Holdings. It trades about -0.02 of its total potential returns per unit of risk. Establishment Labs Holdings is currently generating about 0.03 per unit of volatility. If you would invest  4,466  in Establishment Labs Holdings on September 15, 2024 and sell it today you would earn a total of  105.00  from holding Establishment Labs Holdings or generate 2.35% return on investment over 90 days.

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

IRIDEX  vs.  Establishment Labs Holdings

IRIDEX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IRIDEX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with IRIDEX and Establishment Labs

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

The idea behind IRIDEX and Establishment Labs Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.