Correlation Between Paragon 28 and LivaNova PLC

Can any of the company-specific risk be diversified away by investing in both Paragon 28 and LivaNova 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 Paragon 28 and LivaNova PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Paragon 28 and LivaNova PLC, you can compare the effects of market volatilities on Paragon 28 and LivaNova 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 Paragon 28 with a short position of LivaNova PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paragon 28 and LivaNova PLC.

Diversification Opportunities for Paragon 28 and LivaNova PLC

-0.58

Correlation Coefficient

Paragon 28  LivaNova PLC

Excellent diversification

The 3 months correlation between Paragon and LivaNova is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Paragon 28 and LivaNova PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LivaNova PLC and Paragon 28 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 Paragon 28 are associated (or correlated) with LivaNova PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LivaNova PLC has no effect on the direction of Paragon 28 i.e., Paragon 28 and LivaNova PLC go up and down completely randomly.

Pair Corralation between Paragon 28 and LivaNova PLC

Considering the 90-day investment horizon Paragon 28 is expected to generate 5.25 times more return on investment than LivaNova PLC. However, Paragon 28 is 5.25 times more volatile than LivaNova PLC. It trades about 0.29 of its potential returns per unit of risk. LivaNova PLC is currently generating about -0.04 per unit of risk. If you would invest  583.00  in Paragon 28 on August 17, 2024 and sell it today you would earn a total of  387.00  from holding Paragon 28 or generate 66.38% return on investment over 90 days.

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

Paragon 28  vs.  LivaNova PLC

Paragon 28

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paragon 28 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Paragon 28 sustained solid returns over the last few months and may actually be approaching a breakup point.

LivaNova PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LivaNova PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, LivaNova PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paragon 28 and LivaNova PLC

The main advantage of trading using opposite Paragon 28 and LivaNova PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paragon 28 position performs unexpectedly, LivaNova 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 LivaNova PLC will offset losses from the drop in LivaNova PLC's long position.

The idea behind Paragon 28 and LivaNova 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.