Correlation Between Shockwave Medical and DexCom

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

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

Diversification Opportunities for Shockwave Medical and DexCom

-0.14

Correlation Coefficient

Shockwave Medical  DexCom

Good diversification

The 3 months correlation between Shockwave and DexCom is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Shockwave Medical and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc and Shockwave 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 Shockwave Medical are associated (or correlated) with DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of Shockwave Medical i.e., Shockwave Medical and DexCom go up and down completely randomly.

Pair Corralation between Shockwave Medical and DexCom

If you would invest  6,934  in DexCom Inc on August 30, 2024 and sell it today you would earn a total of  876.00  from holding DexCom Inc or generate 12.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Shockwave Medical  vs.  DexCom Inc

Shockwave Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shockwave Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shockwave Medical is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

DexCom Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, DexCom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shockwave Medical and DexCom

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

The idea behind Shockwave Medical and DexCom 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.