Correlation Between Globus Medical and Electromed

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

By analyzing existing cross correlation between Globus Medical and Electromed, you can compare the effects of market volatilities on Globus Medical 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 Globus Medical with a short position of Electromed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globus Medical and Electromed.

Diversification Opportunities for Globus Medical and Electromed

0.06

Correlation Coefficient

Globus Medical  Electromed

Significant diversification

The 3 months correlation between Globus and Electromed is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Globus Medical and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed and Globus Medical 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 Globus Medical 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 Globus Medical i.e., Globus Medical and Electromed go up and down completely randomly.

Pair Corralation between Globus Medical and Electromed

Given the investment horizon of 90 days Globus Medical is expected to under-perform the Electromed. But the stock apears to be less risky and, when comparing its historical volatility, Globus Medical is 2.19 times less risky than Electromed. The stock trades about -0.17 of its potential returns per unit of risk. The Electromed is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,622  in Electromed on January 30, 2024 and sell it today you would lose (45.00) from holding Electromed or give up 2.77% of portfolio value over 90 days.

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

Globus Medical  vs.  Electromed

Globus Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globus Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Globus Medical is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Electromed

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Globus Medical and Electromed

The main advantage of trading using opposite Globus Medical and Electromed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globus Medical 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.

The idea behind Globus Medical and Electromed 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.