Correlation Between Definitive Healthcare and EDAP TMS

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

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

Diversification Opportunities for Definitive Healthcare and EDAP TMS

0.33

Correlation Coefficient

Definitive Healthcare  EDAP TMS

Weak diversification

The 3 months correlation between Definitive and EDAP is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp 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 Definitive Healthcare 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 Definitive Healthcare Corp 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 Definitive Healthcare i.e., Definitive Healthcare and EDAP TMS go up and down completely randomly.

Pair Corralation between Definitive Healthcare and EDAP TMS

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to under-perform the EDAP TMS. In addition to that, Definitive Healthcare is 1.62 times more volatile than EDAP TMS SA. It trades about -0.07 of its total potential returns per unit of risk. EDAP TMS SA is currently generating about 0.0 per unit of volatility. If you would invest  213.00  in EDAP TMS SA on December 25, 2024 and sell it today you would lose (7.00) from holding EDAP TMS SA or give up 3.29% of portfolio value over 90 days.

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

Definitive Healthcare Corp  vs.  EDAP TMS SA

Definitive Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Definitive Healthcare Corp 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 technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

EDAP TMS SA

Risk-Adjusted Performance

Weak

Over the last 90 days EDAP TMS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, EDAP TMS is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Definitive Healthcare and EDAP TMS

The main advantage of trading using opposite Definitive Healthcare and EDAP TMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definitive Healthcare 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 Definitive Healthcare Corp 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 Stocks Directory module to find actively traded stocks across global markets.