Correlation Between Electromed and Aurora Spine

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

By analyzing existing cross correlation between Electromed and Aurora Spine, you can compare the effects of market volatilities on Electromed and Aurora Spine 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 Aurora Spine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electromed and Aurora Spine.

Diversification Opportunities for Electromed and Aurora Spine

0.79

Correlation Coefficient

Electromed  Aurora Spine

Poor diversification

The 3 months correlation between Electromed and Aurora is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Aurora Spine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Spine 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 Aurora Spine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Spine has no effect on the direction of Electromed i.e., Electromed and Aurora Spine go up and down completely randomly.

Pair Corralation between Electromed and Aurora Spine

Given the investment horizon of 90 days Electromed is expected to under-perform the Aurora Spine. But the stock apears to be less risky and, when comparing its historical volatility, Electromed is 1.46 times less risky than Aurora Spine. The stock trades about -0.09 of its potential returns per unit of risk. The Aurora Spine is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Aurora Spine on December 27, 2024 and sell it today you would lose (3.00) from holding Aurora Spine or give up 10.71% of portfolio value over 90 days.

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

Electromed  vs.  Aurora Spine

Electromed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electromed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary 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.

Aurora Spine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aurora Spine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aurora Spine is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Electromed and Aurora Spine

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

The idea behind Electromed and Aurora Spine 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.