Correlation Between Nephros and InfuSystems Holdings

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

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

Diversification Opportunities for Nephros and InfuSystems Holdings

-0.29

Correlation Coefficient

Nephros  InfuSystems Holdings

Very good diversification

The 3 months correlation between Nephros and InfuSystems is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nephros and InfuSystems Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InfuSystems Holdings and Nephros 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 Nephros are associated (or correlated) with InfuSystems Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InfuSystems Holdings has no effect on the direction of Nephros i.e., Nephros and InfuSystems Holdings go up and down completely randomly.

Pair Corralation between Nephros and InfuSystems Holdings

Given the investment horizon of 90 days Nephros is expected to under-perform the InfuSystems Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Nephros is 1.81 times less risky than InfuSystems Holdings. The stock trades about -0.12 of its potential returns per unit of risk. The InfuSystems Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  633.00  in InfuSystems Holdings on September 2, 2024 and sell it today you would earn a total of  257.00  from holding InfuSystems Holdings or generate 40.6% return on investment over 90 days.

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

Nephros  vs.  InfuSystems Holdings

Nephros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nephros has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

InfuSystems Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InfuSystems Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, InfuSystems Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nephros and InfuSystems Holdings

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

The idea behind Nephros and InfuSystems 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.