Correlation Between DexCom and Electromedical Technologies

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

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

Diversification Opportunities for DexCom and Electromedical Technologies

-0.2

Correlation Coefficient

DexCom  Electromedical Technologies

Good diversification

The 3 months correlation between DexCom and Electromedical is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and Electromedical Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromedical Technologies and DexCom 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 DexCom Inc are associated (or correlated) with Electromedical Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromedical Technologies has no effect on the direction of DexCom i.e., DexCom and Electromedical Technologies go up and down completely randomly.

Pair Corralation between DexCom and Electromedical Technologies

Given the investment horizon of 90 days DexCom Inc is expected to generate 0.2 times more return on investment than Electromedical Technologies. However, DexCom Inc is 5.04 times less risky than Electromedical Technologies. It trades about -0.08 of its potential returns per unit of risk. Electromedical Technologies is currently generating about -0.03 per unit of risk. If you would invest  7,800  in DexCom Inc on December 28, 2024 and sell it today you would lose (1,026) from holding DexCom Inc or give up 13.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

DexCom Inc  vs.  Electromedical Technologies

DexCom Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days DexCom Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Electromedical Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electromedical Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with DexCom and Electromedical Technologies

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

The idea behind DexCom Inc and Electromedical Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.