Correlation Between EDAP TMS and Patterson Companies

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

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

Diversification Opportunities for EDAP TMS and Patterson Companies

-0.08

Correlation Coefficient

EDAP TMS  Patterson Companies

Good diversification

The 3 months correlation between EDAP and Patterson is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding EDAP TMS SA and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies and EDAP TMS 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 EDAP TMS SA are associated (or correlated) with Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of EDAP TMS i.e., EDAP TMS and Patterson Companies go up and down completely randomly.

Pair Corralation between EDAP TMS and Patterson Companies

Given the investment horizon of 90 days EDAP TMS is expected to generate 3.76 times less return on investment than Patterson Companies. But when comparing it to its historical volatility, EDAP TMS SA is 1.11 times less risky than Patterson Companies. It trades about 0.05 of its potential returns per unit of risk. Patterson Companies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,149  in Patterson Companies on November 29, 2024 and sell it today you would earn a total of  958.00  from holding Patterson Companies or generate 44.58% return on investment over 90 days.

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

EDAP TMS SA  vs.  Patterson Companies

EDAP TMS SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EDAP TMS SA are ranked lower than 3 (%) 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 March 2025.

Patterson Companies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Patterson Companies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EDAP TMS and Patterson Companies

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

The idea behind EDAP TMS SA and Patterson Companies 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.