Correlation Between LENSAR and Smith Nephew
Can any of the company-specific risk be diversified away by investing in both LENSAR and Smith Nephew 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 LENSAR and Smith Nephew into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LENSAR Inc and Smith Nephew SNATS, you can compare the effects of market volatilities on LENSAR and Smith Nephew 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 LENSAR with a short position of Smith Nephew. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENSAR and Smith Nephew.
Diversification Opportunities for LENSAR and Smith Nephew
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between LENSAR and Smith is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and Smith Nephew SNATS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew SNATS and LENSAR 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 LENSAR Inc are associated (or correlated) with Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew SNATS has no effect on the direction of LENSAR i.e., LENSAR and Smith Nephew go up and down completely randomly.
Pair Corralation between LENSAR and Smith Nephew
Given the investment horizon of 90 days LENSAR Inc is expected to under-perform the Smith Nephew. In addition to that, LENSAR is 2.35 times more volatile than Smith Nephew SNATS. It trades about -0.06 of its total potential returns per unit of risk. Smith Nephew SNATS is currently generating about 0.14 per unit of volatility. If you would invest 2,444 in Smith Nephew SNATS on October 25, 2024 and sell it today you would earn a total of 79.00 from holding Smith Nephew SNATS or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LENSAR Inc vs. Smith Nephew SNATS
Performance |
| Timeline |
| LENSAR Inc |
| Smith Nephew SNATS |
LENSAR and Smith Nephew Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LENSAR and Smith Nephew
The main advantage of trading using opposite LENSAR and Smith Nephew positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR position performs unexpectedly, Smith Nephew 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 Smith Nephew will offset losses from the drop in Smith Nephew's long position.The idea behind LENSAR Inc and Smith Nephew SNATS 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.| Smith Nephew vs. CochLear Ltd ADR | Smith Nephew vs. Integer Holdings Corp | Smith Nephew vs. Orthofix Medical | Smith Nephew vs. Glaukos Corp |
Check out your portfolio center.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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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