Correlation Between LivaNova PLC and SurModics

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

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

Diversification Opportunities for LivaNova PLC and SurModics

-0.73

Correlation Coefficient

LivaNova PLC  SurModics

Pay attention - limited upside

The 3 months correlation between LivaNova and SurModics is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding LivaNova PLC and SurModics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SurModics and LivaNova PLC 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 LivaNova PLC are associated (or correlated) with SurModics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SurModics has no effect on the direction of LivaNova PLC i.e., LivaNova PLC and SurModics go up and down completely randomly.

Pair Corralation between LivaNova PLC and SurModics

Given the investment horizon of 90 days LivaNova PLC is expected to generate 2.98 times less return on investment than SurModics. But when comparing it to its historical volatility, LivaNova PLC is 1.48 times less risky than SurModics. It trades about 0.01 of its potential returns per unit of risk. SurModics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,471  in SurModics on August 17, 2024 and sell it today you would earn a total of  338.00  from holding SurModics or generate 9.74% return on investment over 90 days.

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

LivaNova PLC  vs.  SurModics

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.

SurModics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SurModics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, SurModics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LivaNova PLC and SurModics

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

The idea behind LivaNova PLC and SurModics 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.