Correlation Between Electromed and Fonar

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

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

Diversification Opportunities for Electromed and Fonar

0.37

Correlation Coefficient

Electromed  Fonar

Weak diversification

The 3 months correlation between Electromed and Fonar is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Fonar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fonar 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 Fonar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fonar has no effect on the direction of Electromed i.e., Electromed and Fonar go up and down completely randomly.

Pair Corralation between Electromed and Fonar

Given the investment horizon of 90 days Electromed is expected to under-perform the Fonar. In addition to that, Electromed is 2.01 times more volatile than Fonar. It trades about -0.03 of its total potential returns per unit of risk. Fonar is currently generating about -0.06 per unit of volatility. If you would invest  1,607  in Fonar on December 1, 2024 and sell it today you would lose (113.00) from holding Fonar or give up 7.03% of portfolio value over 90 days.

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

Electromed  vs.  Fonar

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 latest unsteady performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Fonar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fonar has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Electromed and Fonar

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

The idea behind Electromed and Fonar 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.