Correlation Between Outset Medical and Semler Scientific

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

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

Diversification Opportunities for Outset Medical and Semler Scientific

0.88

Correlation Coefficient

Outset Medical  Semler Scientific

Very poor diversification

The 3 months correlation between Outset and Semler is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Outset Medical and Semler Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semler Scientific and Outset 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 Outset Medical are associated (or correlated) with Semler Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semler Scientific has no effect on the direction of Outset Medical i.e., Outset Medical and Semler Scientific go up and down completely randomly.

Pair Corralation between Outset Medical and Semler Scientific

Allowing for the 90-day total investment horizon Outset Medical is expected to generate 1.3 times less return on investment than Semler Scientific. But when comparing it to its historical volatility, Outset Medical is 1.18 times less risky than Semler Scientific. It trades about 0.21 of its potential returns per unit of risk. Semler Scientific is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,230  in Semler Scientific on September 21, 2024 and sell it today you would earn a total of  3,948  from holding Semler Scientific or generate 177.04% return on investment over 90 days.

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

Outset Medical  vs.  Semler Scientific

Outset Medical

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 16 (%) 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.

Semler Scientific

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semler Scientific are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting essential indicators, Semler Scientific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Outset Medical and Semler Scientific

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

The idea behind Outset Medical and Semler Scientific 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.