Correlation Between Orthofix Medical and Paragon 28

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

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

Diversification Opportunities for Orthofix Medical and Paragon 28

0.65

Correlation Coefficient

Orthofix Medical  Paragon 28

Poor diversification

The 3 months correlation between Orthofix and Paragon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Orthofix Medical and Paragon 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paragon 28 and Orthofix Medical 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 Orthofix Medical are associated (or correlated) with Paragon 28. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paragon 28 has no effect on the direction of Orthofix Medical i.e., Orthofix Medical and Paragon 28 go up and down completely randomly.

Pair Corralation between Orthofix Medical and Paragon 28

Given the investment horizon of 90 days Orthofix Medical is expected to generate 0.68 times more return on investment than Paragon 28. However, Orthofix Medical is 1.47 times less risky than Paragon 28. It trades about 0.1 of its potential returns per unit of risk. Paragon 28 is currently generating about 0.03 per unit of risk. If you would invest  1,288  in Orthofix Medical on June 29, 2024 and sell it today you would earn a total of  250.00  from holding Orthofix Medical or generate 19.41% return on investment over 90 days.

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

Orthofix Medical  vs.  Paragon 28

Orthofix Medical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orthofix Medical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward indicators, Orthofix Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Paragon 28

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paragon 28 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Paragon 28 may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Orthofix Medical and Paragon 28

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

The idea behind Orthofix Medical and Paragon 28 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.