Correlation Between Pro Dex and ICU Medical

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

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

Diversification Opportunities for Pro Dex and ICU Medical

0.85

Correlation Coefficient

Pro Dex  ICU Medical

Very poor diversification

The 3 months correlation between Pro and ICU is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pro Dex and ICU Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICU Medical and Pro Dex 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 Pro Dex are associated (or correlated) with ICU Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICU Medical has no effect on the direction of Pro Dex i.e., Pro Dex and ICU Medical go up and down completely randomly.

Pair Corralation between Pro Dex and ICU Medical

Given the investment horizon of 90 days Pro Dex is expected to generate 3.68 times more return on investment than ICU Medical. However, Pro Dex is 3.68 times more volatile than ICU Medical. It trades about 0.22 of its potential returns per unit of risk. ICU Medical is currently generating about 0.21 per unit of risk. If you would invest  2,198  in Pro Dex on June 29, 2024 and sell it today you would earn a total of  554.00  from holding Pro Dex or generate 25.2% return on investment over 90 days.

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

Pro Dex  vs.  ICU Medical

Pro Dex

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Dex are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pro Dex showed solid returns over the last few months and may actually be approaching a breakup point.

ICU Medical

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ICU Medical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, ICU Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pro Dex and ICU Medical

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

The idea behind Pro Dex and ICU Medical 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.