Correlation Between ResMed and Vivos Therapeutics

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

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

Diversification Opportunities for ResMed and Vivos Therapeutics

0.3

Correlation Coefficient

ResMed  Vivos Therapeutics

Weak diversification

The 3 months correlation between ResMed and Vivos is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ResMed Inc and Vivos Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vivos Therapeutics and ResMed 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 ResMed Inc are associated (or correlated) with Vivos Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vivos Therapeutics has no effect on the direction of ResMed i.e., ResMed and Vivos Therapeutics go up and down completely randomly.

Pair Corralation between ResMed and Vivos Therapeutics

Considering the 90-day investment horizon ResMed is expected to generate 14.34 times less return on investment than Vivos Therapeutics. But when comparing it to its historical volatility, ResMed Inc is 20.71 times less risky than Vivos Therapeutics. It trades about 0.06 of its potential returns per unit of risk. Vivos Therapeutics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  693.00  in Vivos Therapeutics on September 12, 2024 and sell it today you would lose (238.00) from holding Vivos Therapeutics or give up 34.34% of portfolio value over 90 days.

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

ResMed Inc  vs.  Vivos Therapeutics

ResMed Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ResMed Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, ResMed is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Vivos Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vivos Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Vivos Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ResMed and Vivos Therapeutics

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

The idea behind ResMed Inc and Vivos Therapeutics 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.