Correlation Between Electromed and Hologic

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

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

Diversification Opportunities for Electromed and Hologic

0.72

Correlation Coefficient

Electromed  Hologic

Poor diversification

The 3 months correlation between Electromed and Hologic is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Hologic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hologic 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 Hologic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hologic has no effect on the direction of Electromed i.e., Electromed and Hologic go up and down completely randomly.

Pair Corralation between Electromed and Hologic

Given the investment horizon of 90 days Electromed is expected to under-perform the Hologic. In addition to that, Electromed is 1.81 times more volatile than Hologic. It trades about -0.11 of its total potential returns per unit of risk. Hologic is currently generating about -0.13 per unit of volatility. If you would invest  7,227  in Hologic on December 30, 2024 and sell it today you would lose (1,095) from holding Hologic or give up 15.15% of portfolio value over 90 days.

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

Electromed  vs.  Hologic

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.

Hologic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hologic 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 essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Electromed and Hologic

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

The idea behind Electromed and Hologic 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.