Correlation Between Treace Medical and Establishment Labs

Can any of the company-specific risk be diversified away by investing in both Treace Medical and Establishment 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 Treace Medical and Establishment Labs 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 Establishment Labs Holdings, you can compare the effects of market volatilities on Treace Medical and Establishment 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 Treace Medical with a short position of Establishment Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treace Medical and Establishment Labs.

Diversification Opportunities for Treace Medical and Establishment Labs

0.11

Correlation Coefficient

Treace Medical  Establishment Labs

Average diversification

The 3 months correlation between Treace and Establishment is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Treace Medical Concepts and Establishment Labs Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Establishment Labs 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 Establishment Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Establishment Labs has no effect on the direction of Treace Medical i.e., Treace Medical and Establishment Labs go up and down completely randomly.

Pair Corralation between Treace Medical and Establishment Labs

Given the investment horizon of 90 days Treace Medical Concepts is expected to generate 1.22 times more return on investment than Establishment Labs. However, Treace Medical is 1.22 times more volatile than Establishment Labs Holdings. It trades about 0.14 of its potential returns per unit of risk. Establishment Labs Holdings is currently generating about 0.03 per unit of risk. If you would invest  501.00  in Treace Medical Concepts on September 16, 2024 and sell it today you would earn a total of  249.00  from holding Treace Medical Concepts or generate 49.7% return on investment over 90 days.

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

Treace Medical Concepts  vs.  Establishment Labs Holdings

Treace Medical Concepts

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Treace Medical Concepts are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental indicators, Treace Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Establishment Labs

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Establishment Labs Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Establishment Labs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Treace Medical and Establishment Labs

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

The idea behind Treace Medical Concepts and Establishment Labs Holdings 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 CEOs Directory module to screen CEOs from public companies around the world.