Correlation Between Varex Imaging and Outset Medical
Can any of the company-specific risk be diversified away by investing in both Varex Imaging and Outset Medical 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 Varex Imaging and Outset Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Varex Imaging Corp and Outset Medical, you can compare the effects of market volatilities on Varex Imaging and Outset Medical 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 Varex Imaging with a short position of Outset Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varex Imaging and Outset Medical.
Diversification Opportunities for Varex Imaging and Outset Medical
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Varex and Outset is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Varex Imaging Corp and Outset Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outset Medical and Varex Imaging 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 Varex Imaging Corp are associated (or correlated) with Outset Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outset Medical has no effect on the direction of Varex Imaging i.e., Varex Imaging and Outset Medical go up and down completely randomly.
Pair Corralation between Varex Imaging and Outset Medical
Given the investment horizon of 90 days Varex Imaging is expected to generate 7.82 times less return on investment than Outset Medical. But when comparing it to its historical volatility, Varex Imaging Corp is 3.44 times less risky than Outset Medical. It trades about 0.09 of its potential returns per unit of risk. Outset Medical is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 75.00 in Outset Medical on September 20, 2024 and sell it today you would earn a total of 26.00 from holding Outset Medical or generate 34.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Varex Imaging Corp vs. Outset Medical
Performance |
| Timeline |
| Varex Imaging Corp |
| Outset Medical |
Varex Imaging and Outset Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Varex Imaging and Outset Medical
The main advantage of trading using opposite Varex Imaging and Outset Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varex Imaging position performs unexpectedly, Outset Medical 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 Outset Medical will offset losses from the drop in Outset Medical's long position.The idea behind Varex Imaging Corp and Outset Medical 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.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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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