Correlation Between CONMED and IRhythm Technologies

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

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

Diversification Opportunities for CONMED and IRhythm Technologies

0.34

Correlation Coefficient

CONMED  IRhythm Technologies

Weak diversification

The 3 months correlation between CONMED and IRhythm is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding CONMED and iRhythm Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iRhythm Technologies and CONMED 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 CONMED are associated (or correlated) with IRhythm Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iRhythm Technologies has no effect on the direction of CONMED i.e., CONMED and IRhythm Technologies go up and down completely randomly.

Pair Corralation between CONMED and IRhythm Technologies

Given the investment horizon of 90 days CONMED is expected to under-perform the IRhythm Technologies. But the stock apears to be less risky and, when comparing its historical volatility, CONMED is 2.45 times less risky than IRhythm Technologies. The stock trades about -0.4 of its potential returns per unit of risk. The iRhythm Technologies is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,030  in iRhythm Technologies on July 26, 2024 and sell it today you would earn a total of  782.00  from holding iRhythm Technologies or generate 11.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

CONMED  vs.  iRhythm Technologies

CONMED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONMED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

iRhythm Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iRhythm Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IRhythm Technologies is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CONMED and IRhythm Technologies

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

The idea behind CONMED and iRhythm Technologies 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.