Correlation Between Electromed and Dynatronics
Can any of the company-specific risk be diversified away by investing in both Electromed and Dynatronics 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 Electromed and Dynatronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electromed and Dynatronics, you can compare the effects of market volatilities on Electromed and Dynatronics 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 Electromed with a short position of Dynatronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electromed and Dynatronics.
Diversification Opportunities for Electromed and Dynatronics
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Electromed and Dynatronics is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Dynatronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynatronics and Electromed 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 Electromed are associated (or correlated) with Dynatronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynatronics has no effect on the direction of Electromed i.e., Electromed and Dynatronics go up and down completely randomly.
Pair Corralation between Electromed and Dynatronics
Given the investment horizon of 90 days Electromed is expected to generate 0.55 times more return on investment than Dynatronics. However, Electromed is 1.83 times less risky than Dynatronics. It trades about 0.12 of its potential returns per unit of risk. Dynatronics is currently generating about 0.04 per unit of risk. If you would invest 1,040 in Electromed on January 25, 2024 and sell it today you would earn a total of 633.00 from holding Electromed or generate 60.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Electromed vs. Dynatronics
Performance |
Timeline |
Electromed |
Dynatronics |
Electromed and Dynatronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Electromed and Dynatronics
The main advantage of trading using opposite Electromed and Dynatronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electromed position performs unexpectedly, Dynatronics 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 Dynatronics will offset losses from the drop in Dynatronics' long position.The idea behind Electromed and Dynatronics 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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