Correlation Between Electromed and EDAP TMS

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

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

Diversification Opportunities for Electromed and EDAP TMS

0.03

Correlation Coefficient

Electromed  EDAP TMS

Significant diversification

The 3 months correlation between Electromed and EDAP is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and EDAP TMS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDAP TMS SA 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 EDAP TMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDAP TMS SA has no effect on the direction of Electromed i.e., Electromed and EDAP TMS go up and down completely randomly.

Pair Corralation between Electromed and EDAP TMS

Given the investment horizon of 90 days Electromed is expected to under-perform the EDAP TMS. But the stock apears to be less risky and, when comparing its historical volatility, Electromed is 1.14 times less risky than EDAP TMS. The stock trades about -0.11 of its potential returns per unit of risk. The EDAP TMS SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  218.00  in EDAP TMS SA on December 29, 2024 and sell it today you would lose (3.00) from holding EDAP TMS SA or give up 1.38% of portfolio value over 90 days.

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

Electromed  vs.  EDAP TMS SA

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.

EDAP TMS SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EDAP TMS SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, EDAP TMS is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Electromed and EDAP TMS

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

The idea behind Electromed and EDAP TMS SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.