Correlation Between EDAP TMS and Orthofix Medical
Can any of the company-specific risk be diversified away by investing in both EDAP TMS and Orthofix 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 EDAP TMS and Orthofix Medical 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 Orthofix Medical, you can compare the effects of market volatilities on EDAP TMS and Orthofix 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 EDAP TMS with a short position of Orthofix Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDAP TMS and Orthofix Medical.
Diversification Opportunities for EDAP TMS and Orthofix Medical
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between EDAP and Orthofix is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding EDAP TMS SA and Orthofix Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orthofix Medical 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 Orthofix Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orthofix Medical has no effect on the direction of EDAP TMS i.e., EDAP TMS and Orthofix Medical go up and down completely randomly.
Pair Corralation between EDAP TMS and Orthofix Medical
Given the investment horizon of 90 days EDAP TMS SA is expected to generate 0.83 times more return on investment than Orthofix Medical. However, EDAP TMS SA is 1.21 times less risky than Orthofix Medical. It trades about 0.09 of its potential returns per unit of risk. Orthofix Medical is currently generating about -0.01 per unit of risk. If you would invest 726.00 in EDAP TMS SA on January 17, 2024 and sell it today you would earn a total of 31.00 from holding EDAP TMS SA or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
EDAP TMS SA vs. Orthofix Medical
Performance |
| Timeline |
| EDAP TMS SA |
| Orthofix Medical |
EDAP TMS and Orthofix Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDAP TMS and Orthofix Medical
The main advantage of trading using opposite EDAP TMS and Orthofix Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDAP TMS position performs unexpectedly, Orthofix 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 Orthofix Medical will offset losses from the drop in Orthofix Medical's long position.| EDAP TMS vs. The Ensign Group | EDAP TMS vs. Select Medical Holdings | EDAP TMS vs. Encompass Health Corp | EDAP TMS vs. Enhabit |
| Orthofix Medical vs. The Ensign Group | Orthofix Medical vs. Select Medical Holdings | Orthofix Medical vs. Encompass Health Corp | Orthofix Medical vs. Enhabit |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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