Correlation Between Outset Medical and Veeva Systems

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

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

Diversification Opportunities for Outset Medical and Veeva Systems

0.81

Correlation Coefficient

Outset Medical  Veeva Systems

Very poor diversification

The 3 months correlation between Outset and Veeva is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Outset Medical and Veeva Systems Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeva Systems Class and Outset 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 Outset Medical are associated (or correlated) with Veeva Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeva Systems Class has no effect on the direction of Outset Medical i.e., Outset Medical and Veeva Systems go up and down completely randomly.

Pair Corralation between Outset Medical and Veeva Systems

Allowing for the 90-day total investment horizon Outset Medical is expected to generate 3.17 times more return on investment than Veeva Systems. However, Outset Medical is 3.17 times more volatile than Veeva Systems Class. It trades about 0.22 of its potential returns per unit of risk. Veeva Systems Class is currently generating about 0.05 per unit of risk. If you would invest  52.00  in Outset Medical on September 23, 2024 and sell it today you would earn a total of  69.00  from holding Outset Medical or generate 132.69% return on investment over 90 days.

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

Outset Medical  vs.  Veeva Systems Class

Outset Medical

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Veeva Systems Class

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Veeva Systems Class are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Veeva Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Outset Medical and Veeva Systems

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

The idea behind Outset Medical and Veeva Systems Class 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 Global Correlations module to find global opportunities by holding instruments from different markets.