Correlation Between Electromed and Second Sight

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

By analyzing existing cross correlation between Electromed and Second Sight Medical, you can compare the effects of market volatilities on Electromed and Second Sight 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 Second Sight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electromed and Second Sight.

Diversification Opportunities for Electromed and Second Sight

-0.46

Correlation Coefficient

Electromed  Second Sight

Very good diversification

The 3 months correlation between Electromed and Second is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Second Sight Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Second Sight Medical 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 Second Sight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Second Sight Medical has no effect on the direction of Electromed i.e., Electromed and Second Sight go up and down completely randomly.

Pair Corralation between Electromed and Second Sight

Given the investment horizon of 90 days Electromed is expected to generate 0.51 times more return on investment than Second Sight. However, Electromed is 1.95 times less risky than Second Sight. It trades about 0.03 of its potential returns per unit of risk. Second Sight Medical is currently generating about -0.02 per unit of risk. If you would invest  1,259  in Electromed on January 24, 2024 and sell it today you would earn a total of  313.00  from holding Electromed or generate 24.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	16.77%
Values	Daily Returns

Electromed  vs.  Second Sight Medical

Electromed

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Second Sight Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Second Sight Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Second Sight is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Electromed and Second Sight

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

The idea behind Electromed and Second Sight 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.