Correlation Between EDAP TMS and Cogent Biosciences

Can any of the company-specific risk be diversified away by investing in both EDAP TMS and Cogent Biosciences 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 Cogent Biosciences 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 Cogent Biosciences, you can compare the effects of market volatilities on EDAP TMS and Cogent Biosciences 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 Cogent Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDAP TMS and Cogent Biosciences.

Diversification Opportunities for EDAP TMS and Cogent Biosciences

-0.78

Correlation Coefficient

EDAP TMS  Cogent Biosciences

Pay attention - limited upside

The 3 months correlation between EDAP and Cogent is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding EDAP TMS SA and Cogent Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Biosciences 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 Cogent Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Biosciences has no effect on the direction of EDAP TMS i.e., EDAP TMS and Cogent Biosciences go up and down completely randomly.

Pair Corralation between EDAP TMS and Cogent Biosciences

Given the investment horizon of 90 days EDAP TMS SA is expected to under-perform the Cogent Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, EDAP TMS SA is 1.56 times less risky than Cogent Biosciences. The stock trades about -0.45 of its potential returns per unit of risk. The Cogent Biosciences is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  735.00  in Cogent Biosciences on March 12, 2024 and sell it today you would earn a total of  104.00  from holding Cogent Biosciences or generate 14.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

EDAP TMS SA  vs.  Cogent Biosciences

EDAP TMS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDAP TMS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Cogent Biosciences

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Biosciences are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Cogent Biosciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EDAP TMS and Cogent Biosciences

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

The idea behind EDAP TMS SA and Cogent Biosciences 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.