Correlation Between Brainsway and Electromed

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

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

Diversification Opportunities for Brainsway and Electromed

0.66

Correlation Coefficient

Brainsway  Electromed

Poor diversification

The 3 months correlation between Brainsway and Electromed is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Brainsway and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed and Brainsway 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 Brainsway 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 Brainsway i.e., Brainsway and Electromed go up and down completely randomly.

Pair Corralation between Brainsway and Electromed

Given the investment horizon of 90 days Brainsway is expected to generate 2.08 times less return on investment than Electromed. In addition to that, Brainsway is 1.18 times more volatile than Electromed. It trades about 0.11 of its total potential returns per unit of risk. Electromed is currently generating about 0.27 per unit of volatility. If you would invest  1,823  in Electromed on September 12, 2024 and sell it today you would earn a total of  1,058  from holding Electromed or generate 58.04% return on investment over 90 days.

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

Brainsway  vs.  Electromed

Brainsway

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brainsway are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Brainsway showed solid returns over the last few months and may actually be approaching a breakup point.

Electromed

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brainsway and Electromed

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

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.