Correlation Between SurModics and Establishment Labs

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

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

Diversification Opportunities for SurModics and Establishment Labs

-0.08

Correlation Coefficient

SurModics  Establishment Labs

Good diversification

The 3 months correlation between SurModics and Establishment is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding SurModics and Establishment Labs Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Establishment Labs and SurModics 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 SurModics are associated (or correlated) with Establishment Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Establishment Labs has no effect on the direction of SurModics i.e., SurModics and Establishment Labs go up and down completely randomly.

Pair Corralation between SurModics and Establishment Labs

Given the investment horizon of 90 days SurModics is expected to generate 0.14 times more return on investment than Establishment Labs. However, SurModics is 7.16 times less risky than Establishment Labs. It trades about -0.13 of its potential returns per unit of risk. Establishment Labs Holdings is currently generating about -0.03 per unit of risk. If you would invest  4,012  in SurModics on August 17, 2024 and sell it today you would lose (203.00) from holding SurModics or give up 5.06% of portfolio value over 90 days.

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

SurModics  vs.  Establishment Labs Holdings

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.

Establishment Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Establishment Labs Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with SurModics and Establishment Labs

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

The idea behind SurModics and Establishment Labs Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.