Correlation Between Treace Medical and Bone Biologics

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

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

Diversification Opportunities for Treace Medical and Bone Biologics

-0.61

Correlation Coefficient

Treace Medical  Bone Biologics

Excellent diversification

The 3 months correlation between Treace and Bone is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Treace Medical Concepts and Bone Biologics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bone Biologics Corp and Treace 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 Treace Medical Concepts are associated (or correlated) with Bone Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bone Biologics Corp has no effect on the direction of Treace Medical i.e., Treace Medical and Bone Biologics go up and down completely randomly.

Pair Corralation between Treace Medical and Bone Biologics

Given the investment horizon of 90 days Treace Medical is expected to generate 19.97 times less return on investment than Bone Biologics. But when comparing it to its historical volatility, Treace Medical Concepts is 2.98 times less risky than Bone Biologics. It trades about 0.02 of its potential returns per unit of risk. Bone Biologics Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  110.00  in Bone Biologics Corp on September 13, 2024 and sell it today you would earn a total of  2,670  from holding Bone Biologics Corp or generate 2427.27% return on investment over 90 days.

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

Treace Medical Concepts  vs.  Bone Biologics Corp

Treace Medical Concepts

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Treace Medical Concepts are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Treace Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bone Biologics Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bone Biologics Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, Bone Biologics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treace Medical and Bone Biologics

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

The idea behind Treace Medical Concepts and Bone Biologics Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.