Correlation Between Electromed and Definitive Healthcare

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

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

Diversification Opportunities for Electromed and Definitive Healthcare

-0.41

Correlation Coefficient

Electromed  Definitive Healthcare

Very good diversification

The 3 months correlation between Electromed and Definitive is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Definitive Healthcare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definitive Healthcare 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 Definitive Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definitive Healthcare has no effect on the direction of Electromed i.e., Electromed and Definitive Healthcare go up and down completely randomly.

Pair Corralation between Electromed and Definitive Healthcare

Given the investment horizon of 90 days Electromed is expected to generate 0.75 times more return on investment than Definitive Healthcare. However, Electromed is 1.33 times less risky than Definitive Healthcare. It trades about 0.04 of its potential returns per unit of risk. Definitive Healthcare Corp is currently generating about -0.04 per unit of risk. If you would invest  1,164  in Electromed on February 23, 2024 and sell it today you would earn a total of  490.00  from holding Electromed or generate 42.1% return on investment over 90 days.

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

Electromed  vs.  Definitive Healthcare Corp

Electromed

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Electromed may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Definitive Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Definitive Healthcare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Electromed and Definitive Healthcare

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

The idea behind Electromed and Definitive Healthcare Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.