Correlation Between Neuropace and Outset Medical

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

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

Diversification Opportunities for Neuropace and Outset Medical

0.9

Correlation Coefficient

Neuropace  Outset Medical

Almost no diversification

The 3 months correlation between Neuropace and Outset is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Neuropace and Outset Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outset Medical and Neuropace 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 Neuropace 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 Neuropace i.e., Neuropace and Outset Medical go up and down completely randomly.

Pair Corralation between Neuropace and Outset Medical

Given the investment horizon of 90 days Neuropace is expected to generate 1.71 times less return on investment than Outset Medical. But when comparing it to its historical volatility, Neuropace is 1.42 times less risky than Outset Medical. It trades about 0.16 of its potential returns per unit of risk. Outset Medical is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Outset Medical on September 15, 2024 and sell it today you would earn a total of  59.00  from holding Outset Medical or generate 113.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Neuropace  vs.  Outset Medical

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 unsteady fundamental indicators, Neuropace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Outset Medical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neuropace and Outset Medical

The main advantage of trading using opposite Neuropace and Outset Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neuropace 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 Neuropace 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.