Correlation Between Electromed and Orthopediatrics Corp

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

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

Diversification Opportunities for Electromed and Orthopediatrics Corp

0.08

Correlation Coefficient

Electromed  Orthopediatrics Corp

Significant diversification

The 3 months correlation between Electromed and Orthopediatrics is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Orthopediatrics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orthopediatrics Corp 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 Orthopediatrics Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orthopediatrics Corp has no effect on the direction of Electromed i.e., Electromed and Orthopediatrics Corp go up and down completely randomly.

Pair Corralation between Electromed and Orthopediatrics Corp

Given the investment horizon of 90 days Electromed is expected to generate 0.97 times more return on investment than Orthopediatrics Corp. However, Electromed is 1.03 times less risky than Orthopediatrics Corp. It trades about 0.03 of its potential returns per unit of risk. Orthopediatrics Corp is currently generating about 0.0 per unit of risk. If you would invest  1,254  in Electromed on January 31, 2024 and sell it today you would earn a total of  386.00  from holding Electromed or generate 30.78% return on investment over 90 days.

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

Electromed  vs.  Orthopediatrics Corp

Electromed

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Orthopediatrics Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Orthopediatrics Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Orthopediatrics Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electromed and Orthopediatrics Corp

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

The idea behind Electromed and Orthopediatrics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.