Correlation Between EDAP TMS and Spine Injury

Can any of the company-specific risk be diversified away by investing in both EDAP TMS and Spine Injury 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 Spine Injury 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 Spine Injury Solutions, you can compare the effects of market volatilities on EDAP TMS and Spine Injury 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 Spine Injury. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDAP TMS and Spine Injury.

Diversification Opportunities for EDAP TMS and Spine Injury

0.06

Correlation Coefficient

EDAP TMS  Spine Injury

Significant diversification

The 3 months correlation between EDAP and Spine is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding EDAP TMS SA and Spine Injury Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spine Injury Solutions 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 Spine Injury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spine Injury Solutions has no effect on the direction of EDAP TMS i.e., EDAP TMS and Spine Injury go up and down completely randomly.

Pair Corralation between EDAP TMS and Spine Injury

Given the investment horizon of 90 days EDAP TMS SA is expected to generate 4.09 times more return on investment than Spine Injury. However, EDAP TMS is 4.09 times more volatile than Spine Injury Solutions. It trades about 0.05 of its potential returns per unit of risk. Spine Injury Solutions is currently generating about -0.08 per unit of risk. If you would invest  220.00  in EDAP TMS SA on December 19, 2024 and sell it today you would earn a total of  14.00  from holding EDAP TMS SA or generate 6.36% return on investment over 90 days.

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

EDAP TMS SA  vs.  Spine Injury Solutions

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 April 2025.

Spine Injury Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spine Injury Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Spine Injury is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with EDAP TMS and Spine Injury

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

The idea behind EDAP TMS SA and Spine Injury Solutions 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.