Correlation Between EDAP TMS and Medtronic PLC
Can any of the company-specific risk be diversified away by investing in both EDAP TMS and Medtronic PLC 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 EDAP TMS and Medtronic PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDAP TMS SA and Medtronic PLC, you can compare the effects of market volatilities on EDAP TMS and Medtronic PLC 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 EDAP TMS with a short position of Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDAP TMS and Medtronic PLC.
Diversification Opportunities for EDAP TMS and Medtronic PLC
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EDAP and Medtronic is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding EDAP TMS SA and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC and EDAP TMS 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 EDAP TMS SA are associated (or correlated) with Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of EDAP TMS i.e., EDAP TMS and Medtronic PLC go up and down completely randomly.
Pair Corralation between EDAP TMS and Medtronic PLC
Given the investment horizon of 90 days EDAP TMS SA is expected to generate 2.88 times more return on investment than Medtronic PLC. However, EDAP TMS is 2.88 times more volatile than Medtronic PLC. It trades about 0.08 of its potential returns per unit of risk. Medtronic PLC is currently generating about -0.11 per unit of risk. If you would invest 622.00 in EDAP TMS SA on January 20, 2024 and sell it today you would earn a total of 91.00 from holding EDAP TMS SA or generate 14.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
EDAP TMS SA vs. Medtronic PLC
Performance |
| Timeline |
| EDAP TMS SA |
| Medtronic PLC |
EDAP TMS and Medtronic PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDAP TMS and Medtronic PLC
The main advantage of trading using opposite EDAP TMS and Medtronic PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDAP TMS position performs unexpectedly, Medtronic PLC 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 Medtronic PLC will offset losses from the drop in Medtronic PLC's long position.| EDAP TMS vs. Agilent Technologies | EDAP TMS vs. Illumina | EDAP TMS vs. Waters | EDAP TMS vs. Thermo Fisher Scientific |
| Medtronic PLC vs. Agilent Technologies | Medtronic PLC vs. Illumina | Medtronic PLC vs. Waters | Medtronic PLC vs. Thermo Fisher Scientific |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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