Correlation Between Cutera and EDAP TMS

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

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

Diversification Opportunities for Cutera and EDAP TMS

0.45

Correlation Coefficient

Cutera  EDAP TMS

Very weak diversification

The 3 months correlation between Cutera and EDAP is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cutera Inc and EDAP TMS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDAP TMS SA and Cutera 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 Cutera Inc are associated (or correlated) with EDAP TMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDAP TMS SA has no effect on the direction of Cutera i.e., Cutera and EDAP TMS go up and down completely randomly.

Pair Corralation between Cutera and EDAP TMS

Given the investment horizon of 90 days Cutera Inc is expected to under-perform the EDAP TMS. In addition to that, Cutera is 3.62 times more volatile than EDAP TMS SA. It trades about -0.1 of its total potential returns per unit of risk. EDAP TMS SA is currently generating about 0.03 per unit of volatility. If you would invest  218.00  in EDAP TMS SA on December 28, 2024 and sell it today you would earn a total of  4.00  from holding EDAP TMS SA or generate 1.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	83.33%
Values	Daily Returns

Cutera Inc  vs.  EDAP TMS SA

Cutera Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cutera Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

EDAP TMS SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EDAP TMS SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, EDAP TMS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cutera and EDAP TMS

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

The idea behind Cutera Inc and EDAP TMS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.