Correlation Between Doximity and Establishment Labs

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

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

Diversification Opportunities for Doximity and Establishment Labs

-0.24

Correlation Coefficient

Doximity  Establishment Labs

Very good diversification

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

Pair Corralation between Doximity and Establishment Labs

Given the investment horizon of 90 days Doximity is expected to generate 1.22 times more return on investment than Establishment Labs. However, Doximity is 1.22 times more volatile than Establishment Labs Holdings. It trades about 0.24 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  2,388  in Doximity on March 9, 2024 and sell it today you would earn a total of  532.00  from holding Doximity or generate 22.28% return on investment over 90 days.

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

Doximity  vs.  Establishment Labs Holdings

Doximity

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Doximity are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Doximity may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Establishment Labs

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Establishment Labs Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Establishment Labs may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Doximity and Establishment Labs

The main advantage of trading using opposite Doximity and Establishment Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Doximity 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 Doximity 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.