Correlation Between IRIDEX and Tenon Medical

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

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

Diversification Opportunities for IRIDEX and Tenon Medical

0.35

Correlation Coefficient

IRIDEX  Tenon Medical

Weak diversification

The 3 months correlation between IRIDEX and Tenon is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding IRIDEX and Tenon Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenon Medical 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 Tenon Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenon Medical has no effect on the direction of IRIDEX i.e., IRIDEX and Tenon Medical go up and down completely randomly.

Pair Corralation between IRIDEX and Tenon Medical

Given the investment horizon of 90 days IRIDEX is expected to under-perform the Tenon Medical. But the stock apears to be less risky and, when comparing its historical volatility, IRIDEX is 2.79 times less risky than Tenon Medical. The stock trades about -0.01 of its potential returns per unit of risk. The Tenon Medical is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  392.00  in Tenon Medical on August 30, 2024 and sell it today you would lose (158.00) from holding Tenon Medical or give up 40.31% of portfolio value over 90 days.

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

IRIDEX  vs.  Tenon Medical

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 fairly strong forward indicators, IRIDEX is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Tenon Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tenon Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Tenon Medical is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IRIDEX and Tenon Medical

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

The idea behind IRIDEX and Tenon 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.