Correlation Between Diagnostic Medical and Eutelsat Communications

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

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

Diversification Opportunities for Diagnostic Medical and Eutelsat Communications

-0.72

Correlation Coefficient

Diagnostic Medical  Eutelsat Communications

Pay attention - limited upside

The 3 months correlation between Diagnostic and Eutelsat is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Diagnostic Medical Systems and Eutelsat Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eutelsat Communications and Diagnostic 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 Diagnostic Medical Systems are associated (or correlated) with Eutelsat Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eutelsat Communications has no effect on the direction of Diagnostic Medical i.e., Diagnostic Medical and Eutelsat Communications go up and down completely randomly.

Pair Corralation between Diagnostic Medical and Eutelsat Communications

Assuming the 90 days trading horizon Diagnostic Medical Systems is expected to generate 0.98 times more return on investment than Eutelsat Communications. However, Diagnostic Medical Systems is 1.02 times less risky than Eutelsat Communications. It trades about 0.14 of its potential returns per unit of risk. Eutelsat Communications SA is currently generating about -0.32 per unit of risk. If you would invest  74.00  in Diagnostic Medical Systems on December 2, 2024 and sell it today you would earn a total of  26.00  from holding Diagnostic Medical Systems or generate 35.14% return on investment over 90 days.

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

Diagnostic Medical Systems  vs.  Eutelsat Communications SA

Diagnostic Medical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Diagnostic Medical Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Diagnostic Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Eutelsat Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eutelsat Communications SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Diagnostic Medical and Eutelsat Communications

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

The idea behind Diagnostic Medical Systems and Eutelsat Communications SA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.