Correlation Between Rapid Micro and NuVasive

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

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

Diversification Opportunities for Rapid Micro and NuVasive

0.08

Correlation Coefficient

Rapid Micro  NuVasive

Significant diversification

The 3 months correlation between Rapid and NuVasive is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rapid Micro Biosystems and NuVasive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuVasive and Rapid Micro 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 Rapid Micro Biosystems are associated (or correlated) with NuVasive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuVasive has no effect on the direction of Rapid Micro i.e., Rapid Micro and NuVasive go up and down completely randomly.

Pair Corralation between Rapid Micro and NuVasive

Given the investment horizon of 90 days Rapid Micro is expected to generate 2.77 times less return on investment than NuVasive. In addition to that, Rapid Micro is 2.29 times more volatile than NuVasive. It trades about 0.02 of its total potential returns per unit of risk. NuVasive is currently generating about 0.13 per unit of volatility. If you would invest  3,963  in NuVasive on August 31, 2024 and sell it today you would earn a total of  272.00  from holding NuVasive or generate 6.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	8.56%
Values	Daily Returns

Rapid Micro Biosystems  vs.  NuVasive

Rapid Micro Biosystems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rapid Micro Biosystems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Rapid Micro exhibited solid returns over the last few months and may actually be approaching a breakup point.

NuVasive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NuVasive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NuVasive is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rapid Micro and NuVasive

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

The idea behind Rapid Micro Biosystems and NuVasive 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.