Correlation Between Outset MedicalInc and DexCom

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

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

Diversification Opportunities for Outset MedicalInc and DexCom

-0.85

Correlation Coefficient

Outset MedicalInc  DexCom

Pay attention - limited upside

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

Pair Corralation between Outset MedicalInc and DexCom

Allowing for the 90-day total investment horizon Outset MedicalInc is expected to generate 2.34 times more return on investment than DexCom. However, Outset MedicalInc is 2.34 times more volatile than DexCom Inc. It trades about 0.13 of its potential returns per unit of risk. DexCom Inc is currently generating about -0.16 per unit of risk. If you would invest  208.00  in Outset MedicalInc on January 29, 2024 and sell it today you would earn a total of  32.00  from holding Outset MedicalInc or generate 15.38% return on investment over 90 days.

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

Outset MedicalInc  vs.  DexCom Inc

Outset MedicalInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Outset MedicalInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

DexCom Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, DexCom is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Outset MedicalInc and DexCom

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

The idea behind Outset MedicalInc and DexCom Inc 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.