Correlation Between Venus Concept and Establishment Labs

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

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

Diversification Opportunities for Venus Concept and Establishment Labs

-0.84

Correlation Coefficient

Venus Concept  Establishment Labs

Pay attention - limited upside

The 3 months correlation between Venus and Establishment is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Venus Concept and Establishment Labs Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Establishment Labs and Venus Concept 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 Venus Concept 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 Venus Concept i.e., Venus Concept and Establishment Labs go up and down completely randomly.

Pair Corralation between Venus Concept and Establishment Labs

Given the investment horizon of 90 days Venus Concept is expected to generate 2.37 times more return on investment than Establishment Labs. However, Venus Concept is 2.37 times more volatile than Establishment Labs Holdings. It trades about 0.07 of its potential returns per unit of risk. Establishment Labs Holdings is currently generating about 0.13 per unit of risk. If you would invest  61.00  in Venus Concept on February 14, 2024 and sell it today you would earn a total of  4.50  from holding Venus Concept or generate 7.38% return on investment over 90 days.

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

Venus Concept  vs.  Establishment Labs Holdings

Venus Concept

Risk-Adjusted Performance

0 of 100

Very Weak

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

Establishment Labs

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Establishment Labs Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Establishment Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Venus Concept and Establishment Labs

The main advantage of trading using opposite Venus Concept and Establishment Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Venus Concept 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 Venus Concept 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.