Correlation Between SANUWAVE Health and LENSAR

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

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

Diversification Opportunities for SANUWAVE Health and LENSAR

0.94

Correlation Coefficient

SANUWAVE Health  LENSAR

Almost no diversification

The 3 months correlation between SANUWAVE and LENSAR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SANUWAVE Health and LENSAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENSAR Inc and SANUWAVE Health 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 SANUWAVE Health are associated (or correlated) with LENSAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENSAR Inc has no effect on the direction of SANUWAVE Health i.e., SANUWAVE Health and LENSAR go up and down completely randomly.

Pair Corralation between SANUWAVE Health and LENSAR

Given the investment horizon of 90 days SANUWAVE Health is expected to generate 1.36 times more return on investment than LENSAR. However, SANUWAVE Health is 1.36 times more volatile than LENSAR Inc. It trades about 0.23 of its potential returns per unit of risk. LENSAR Inc is currently generating about 0.21 per unit of risk. If you would invest  1,050  in SANUWAVE Health on September 23, 2024 and sell it today you would earn a total of  1,300  from holding SANUWAVE Health or generate 123.81% return on investment over 90 days.

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

SANUWAVE Health  vs.  LENSAR Inc

SANUWAVE Health

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SANUWAVE Health are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SANUWAVE Health showed solid returns over the last few months and may actually be approaching a breakup point.

LENSAR Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SANUWAVE Health and LENSAR

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

The idea behind SANUWAVE Health and LENSAR Inc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.