Correlation Between PulmonxCorp and Medtronic PLC

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

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

Diversification Opportunities for PulmonxCorp and Medtronic PLC

0.59

Correlation Coefficient

PulmonxCorp  Medtronic PLC

Very weak diversification

The 3 months correlation between PulmonxCorp and Medtronic is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PulmonxCorp and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC and PulmonxCorp 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 PulmonxCorp are associated (or correlated) with Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of PulmonxCorp i.e., PulmonxCorp and Medtronic PLC go up and down completely randomly.

Pair Corralation between PulmonxCorp and Medtronic PLC

Given the investment horizon of 90 days PulmonxCorp is expected to generate 4.73 times more return on investment than Medtronic PLC. However, PulmonxCorp is 4.73 times more volatile than Medtronic PLC. It trades about 0.18 of its potential returns per unit of risk. Medtronic PLC is currently generating about -0.14 per unit of risk. If you would invest  824.00  in PulmonxCorp on February 5, 2024 and sell it today you would earn a total of  158.00  from holding PulmonxCorp or generate 19.17% return on investment over 90 days.

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

PulmonxCorp  vs.  Medtronic PLC

PulmonxCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PulmonxCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Medtronic PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medtronic PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Medtronic PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PulmonxCorp and Medtronic PLC

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

The idea behind PulmonxCorp and Medtronic PLC 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.