Correlation Between Treace Medical and Neuronetics

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

Diversification Opportunities for Treace Medical and Neuronetics

0.3

Correlation Coefficient

Treace Medical  Neuronetics

Weak diversification

The 3 months correlation between Treace and Neuronetics is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Treace Medical Concepts and Neuronetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuronetics 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 Neuronetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuronetics has no effect on the direction of Treace Medical i.e., Treace Medical and Neuronetics go up and down completely randomly.

Pair Corralation between Treace Medical and Neuronetics

Given the investment horizon of 90 days Treace Medical is expected to generate 1.22 times less return on investment than Neuronetics. But when comparing it to its historical volatility, Treace Medical Concepts is 1.5 times less risky than Neuronetics. It trades about 0.14 of its potential returns per unit of risk. Neuronetics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Neuronetics on September 15, 2024 and sell it today you would earn a total of  34.00  from holding Neuronetics or generate 43.59% return on investment over 90 days.

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

Treace Medical Concepts  vs.  Neuronetics

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 uncertain fundamental indicators, Treace Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Neuronetics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Neuronetics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward indicators, Neuronetics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treace Medical and Neuronetics

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

The idea behind Treace Medical Concepts and Neuronetics 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.