Correlation Between Establishment Labs and EDAP TMS
Can any of the company-specific risk be diversified away by investing in both Establishment Labs and EDAP TMS 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 Establishment Labs and EDAP TMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Establishment Labs Holdings and EDAP TMS SA, you can compare the effects of market volatilities on Establishment Labs and EDAP TMS 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 Establishment Labs with a short position of EDAP TMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Establishment Labs and EDAP TMS.
Diversification Opportunities for Establishment Labs and EDAP TMS
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Establishment and EDAP is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Establishment Labs Holdings and EDAP TMS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDAP TMS SA and Establishment Labs 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 Establishment Labs Holdings are associated (or correlated) with EDAP TMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDAP TMS SA has no effect on the direction of Establishment Labs i.e., Establishment Labs and EDAP TMS go up and down completely randomly.
Pair Corralation between Establishment Labs and EDAP TMS
Given the investment horizon of 90 days Establishment Labs Holdings is expected to generate 1.26 times more return on investment than EDAP TMS. However, Establishment Labs is 1.26 times more volatile than EDAP TMS SA. It trades about -0.01 of its potential returns per unit of risk. EDAP TMS SA is currently generating about -0.11 per unit of risk. If you would invest 4,970 in Establishment Labs Holdings on January 26, 2024 and sell it today you would lose (75.00) from holding Establishment Labs Holdings or give up 1.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Establishment Labs Holdings vs. EDAP TMS SA
Performance |
| Timeline |
| Establishment Labs |
| EDAP TMS SA |
Establishment Labs and EDAP TMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Establishment Labs and EDAP TMS
The main advantage of trading using opposite Establishment Labs and EDAP TMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Establishment Labs position performs unexpectedly, EDAP TMS 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 EDAP TMS will offset losses from the drop in EDAP TMS's long position.The idea behind Establishment Labs Holdings and EDAP TMS SA 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.| EDAP TMS vs. Henry Schein | EDAP TMS vs. Owens Minor | EDAP TMS vs. Cardinal Health | EDAP TMS vs. Patterson Companies |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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