Correlation Between Utah Medical and LeMaitre Vascular

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

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

Diversification Opportunities for Utah Medical and LeMaitre Vascular

-0.12

Correlation Coefficient

Utah Medical  LeMaitre Vascular

Good diversification

The 3 months correlation between Utah and LeMaitre is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Utah Medical Products and LeMaitre Vascular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LeMaitre Vascular and Utah Medical 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 Utah Medical Products are associated (or correlated) with LeMaitre Vascular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LeMaitre Vascular has no effect on the direction of Utah Medical i.e., Utah Medical and LeMaitre Vascular go up and down completely randomly.

Pair Corralation between Utah Medical and LeMaitre Vascular

Given the investment horizon of 90 days Utah Medical Products is expected to under-perform the LeMaitre Vascular. But the stock apears to be less risky and, when comparing its historical volatility, Utah Medical Products is 1.15 times less risky than LeMaitre Vascular. The stock trades about -0.08 of its potential returns per unit of risk. The LeMaitre Vascular is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,605  in LeMaitre Vascular on March 14, 2024 and sell it today you would earn a total of  292.00  from holding LeMaitre Vascular or generate 3.84% return on investment over 90 days.

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

Utah Medical Products  vs.  LeMaitre Vascular

Utah Medical Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utah Medical Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Utah Medical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

LeMaitre Vascular

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LeMaitre Vascular are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, LeMaitre Vascular unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Utah Medical and LeMaitre Vascular

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

The idea behind Utah Medical Products and LeMaitre Vascular 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.