Correlation Between Electromed and Nevro Corp

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

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

Diversification Opportunities for Electromed and Nevro Corp

-0.42

Correlation Coefficient

Electromed  Nevro Corp

Very good diversification

The 3 months correlation between Electromed and Nevro is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Nevro Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevro Corp 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 Nevro Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevro Corp has no effect on the direction of Electromed i.e., Electromed and Nevro Corp go up and down completely randomly.

Pair Corralation between Electromed and Nevro Corp

Given the investment horizon of 90 days Electromed is expected to under-perform the Nevro Corp. But the stock apears to be less risky and, when comparing its historical volatility, Electromed is 1.31 times less risky than Nevro Corp. The stock trades about -0.11 of its potential returns per unit of risk. The Nevro Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  372.00  in Nevro Corp on December 30, 2024 and sell it today you would earn a total of  212.00  from holding Nevro Corp or generate 56.99% return on investment over 90 days.

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

Electromed  vs.  Nevro Corp

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.

Nevro Corp

Risk-Adjusted Performance

Good

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

Pair Trading with Electromed and Nevro Corp

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

The idea behind Electromed and Nevro Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.