Correlation Between EDAP TMS and Electromed
Can any of the company-specific risk be diversified away by investing in both EDAP TMS and Electromed 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 Electromed 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 Electromed, you can compare the effects of market volatilities on EDAP TMS and Electromed 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 Electromed. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDAP TMS and Electromed.
Diversification Opportunities for EDAP TMS and Electromed
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EDAP and Electromed is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding EDAP TMS SA and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed 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 Electromed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromed has no effect on the direction of EDAP TMS i.e., EDAP TMS and Electromed go up and down completely randomly.
Pair Corralation between EDAP TMS and Electromed
Given the investment horizon of 90 days EDAP TMS SA is expected to generate 1.34 times more return on investment than Electromed. However, EDAP TMS is 1.34 times more volatile than Electromed. It trades about 0.25 of its potential returns per unit of risk. Electromed is currently generating about 0.15 per unit of risk. If you would invest 593.00 in EDAP TMS SA on December 29, 2023 and sell it today you would earn a total of 142.00 from holding EDAP TMS SA or generate 23.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.65% |
Values | Daily Returns |
EDAP TMS SA vs. Electromed
Performance |
Timeline |
EDAP TMS SA |
Electromed |
EDAP TMS and Electromed Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EDAP TMS and Electromed
The main advantage of trading using opposite EDAP TMS and Electromed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDAP TMS position performs unexpectedly, Electromed 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 Electromed will offset losses from the drop in Electromed's long position.EDAP TMS vs. Cigna Corp | EDAP TMS vs. Definitive Healthcare Corp | EDAP TMS vs. Guardant Health | EDAP TMS vs. Laboratory |
Electromed vs. Cigna Corp | Electromed vs. Definitive Healthcare Corp | Electromed vs. Guardant Health | Electromed vs. Laboratory |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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