Correlation Between Heart Test and ReShape Lifesciences

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

By analyzing existing cross correlation between Heart Test Laboratories and ReShape Lifesciences, you can compare the effects of market volatilities on Heart Test and ReShape Lifesciences 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 Heart Test with a short position of ReShape Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heart Test and ReShape Lifesciences.

Diversification Opportunities for Heart Test and ReShape Lifesciences

-0.48

Correlation Coefficient

Heart Test  ReShape Lifesciences

Very good diversification

The 3 months correlation between Heart and ReShape is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Heart Test Laboratories and ReShape Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReShape Lifesciences and Heart Test 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 Heart Test Laboratories are associated (or correlated) with ReShape Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReShape Lifesciences has no effect on the direction of Heart Test i.e., Heart Test and ReShape Lifesciences go up and down completely randomly.

Pair Corralation between Heart Test and ReShape Lifesciences

Given the investment horizon of 90 days Heart Test Laboratories is expected to under-perform the ReShape Lifesciences. In addition to that, Heart Test is 2.0 times more volatile than ReShape Lifesciences. It trades about -0.08 of its total potential returns per unit of risk. ReShape Lifesciences is currently generating about 0.08 per unit of volatility. If you would invest  15.00  in ReShape Lifesciences on February 23, 2024 and sell it today you would earn a total of  3.00  from holding ReShape Lifesciences or generate 20.0% return on investment over 90 days.

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

Heart Test Laboratories  vs.  ReShape Lifesciences

Heart Test Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heart Test Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ReShape Lifesciences

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ReShape Lifesciences are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, ReShape Lifesciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heart Test and ReShape Lifesciences

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

The idea behind Heart Test Laboratories and ReShape Lifesciences 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.