Correlation Between Pulmonx Corp and IRhythm Technologies

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

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

Diversification Opportunities for Pulmonx Corp and IRhythm Technologies

0.24

Correlation Coefficient

Pulmonx Corp  IRhythm Technologies

Modest diversification

The 3 months correlation between Pulmonx and IRhythm is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Pulmonx Corp and iRhythm Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iRhythm Technologies and Pulmonx Corp 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 Pulmonx Corp 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 Pulmonx Corp i.e., Pulmonx Corp and IRhythm Technologies go up and down completely randomly.

Pair Corralation between Pulmonx Corp and IRhythm Technologies

Given the investment horizon of 90 days Pulmonx Corp is expected to under-perform the IRhythm Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Pulmonx Corp is 1.67 times less risky than IRhythm Technologies. The stock trades about -0.41 of its potential returns per unit of risk. The iRhythm Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,163  in iRhythm Technologies on July 28, 2024 and sell it today you would earn a total of  405.00  from holding iRhythm Technologies or generate 5.65% return on investment over 90 days.

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

Pulmonx Corp  vs.  iRhythm Technologies

Pulmonx Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pulmonx Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Pulmonx Corp and IRhythm Technologies

The main advantage of trading using opposite Pulmonx Corp and IRhythm Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pulmonx Corp 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 Pulmonx Corp 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.