Correlation Between Neuronetics and ProPhase Labs

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

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

Diversification Opportunities for Neuronetics and ProPhase Labs

-0.41

Correlation Coefficient

Neuronetics  ProPhase Labs

Very good diversification

The 3 months correlation between Neuronetics and ProPhase is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Neuronetics and ProPhase Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProPhase Labs and Neuronetics 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 Neuronetics are associated (or correlated) with ProPhase Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProPhase Labs has no effect on the direction of Neuronetics i.e., Neuronetics and ProPhase Labs go up and down completely randomly.

Pair Corralation between Neuronetics and ProPhase Labs

Given the investment horizon of 90 days Neuronetics is expected to generate 1.12 times more return on investment than ProPhase Labs. However, Neuronetics is 1.12 times more volatile than ProPhase Labs. It trades about 0.16 of its potential returns per unit of risk. ProPhase Labs is currently generating about -0.24 per unit of risk. If you would invest  76.00  in Neuronetics on September 28, 2024 and sell it today you would earn a total of  66.00  from holding Neuronetics or generate 86.84% return on investment over 90 days.

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

Neuronetics  vs.  ProPhase Labs

Neuronetics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neuronetics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Neuronetics displayed solid returns over the last few months and may actually be approaching a breakup point.

ProPhase Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProPhase Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Neuronetics and ProPhase Labs

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

The idea behind Neuronetics and ProPhase Labs 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.