Correlation Between Modular Medical and Neuropace

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

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

Diversification Opportunities for Modular Medical and Neuropace

-0.9

Correlation Coefficient

Modular Medical  Neuropace

Pay attention - limited upside

The 3 months correlation between Modular and Neuropace is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Modular Medical and Neuropace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuropace and Modular 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 Modular Medical are associated (or correlated) with Neuropace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuropace has no effect on the direction of Modular Medical i.e., Modular Medical and Neuropace go up and down completely randomly.

Pair Corralation between Modular Medical and Neuropace

Given the investment horizon of 90 days Modular Medical is expected to generate 11.19 times less return on investment than Neuropace. But when comparing it to its historical volatility, Modular Medical is 1.0 times less risky than Neuropace. It trades about 0.01 of its potential returns per unit of risk. Neuropace is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  144.00  in Neuropace on September 23, 2024 and sell it today you would earn a total of  1,009  from holding Neuropace or generate 700.69% return on investment over 90 days.

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

Modular Medical  vs.  Neuropace

Modular Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modular Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Neuropace

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neuropace are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Neuropace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modular Medical and Neuropace

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

The idea behind Modular Medical and Neuropace 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.