Correlation Between STRATA Skin and BrainsWay

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

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

Diversification Opportunities for STRATA Skin and BrainsWay

0.05

Correlation Coefficient

STRATA Skin  BrainsWay

Significant diversification

The 3 months correlation between STRATA and BrainsWay is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding STRATA Skin Sciences and BrainsWay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrainsWay and STRATA Skin 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 STRATA Skin Sciences are associated (or correlated) with BrainsWay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrainsWay has no effect on the direction of STRATA Skin i.e., STRATA Skin and BrainsWay go up and down completely randomly.

Pair Corralation between STRATA Skin and BrainsWay

Given the investment horizon of 90 days STRATA Skin Sciences is expected to under-perform the BrainsWay. But the stock apears to be less risky and, when comparing its historical volatility, STRATA Skin Sciences is 6.3 times less risky than BrainsWay. The stock trades about -0.03 of its potential returns per unit of risk. The BrainsWay is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  315.00  in BrainsWay on September 21, 2024 and sell it today you would earn a total of  538.00  from holding BrainsWay or generate 170.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

STRATA Skin Sciences  vs.  BrainsWay

STRATA Skin Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRATA Skin Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, STRATA Skin is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BrainsWay

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BrainsWay are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BrainsWay reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STRATA Skin and BrainsWay

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

The idea behind STRATA Skin Sciences and BrainsWay 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.