Correlation Between Electromed and Airsculpt Technologies

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

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

Diversification Opportunities for Electromed and Airsculpt Technologies

0.61

Correlation Coefficient

Electromed  Airsculpt Technologies

Poor diversification

The 3 months correlation between Electromed and Airsculpt is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Airsculpt Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airsculpt Technologies and Electromed 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 Electromed are associated (or correlated) with Airsculpt Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airsculpt Technologies has no effect on the direction of Electromed i.e., Electromed and Airsculpt Technologies go up and down completely randomly.

Pair Corralation between Electromed and Airsculpt Technologies

Given the investment horizon of 90 days Electromed is expected to generate 0.46 times more return on investment than Airsculpt Technologies. However, Electromed is 2.18 times less risky than Airsculpt Technologies. It trades about -0.18 of its potential returns per unit of risk. Airsculpt Technologies is currently generating about -0.28 per unit of risk. If you would invest  3,026  in Electromed on September 24, 2024 and sell it today you would lose (253.00) from holding Electromed or give up 8.36% of portfolio value over 90 days.

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

Electromed  vs.  Airsculpt Technologies

Electromed

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Airsculpt Technologies

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Airsculpt Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Airsculpt Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Electromed and Airsculpt Technologies

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

The idea behind Electromed and Airsculpt 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.