Correlation Between Electromed and STERIS Plc

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

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

Diversification Opportunities for Electromed and STERIS Plc

-0.87

Correlation Coefficient

Electromed  STERIS Plc

Pay attention - limited upside

The 3 months correlation between Electromed and STERIS is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and STERIS plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STERIS plc 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 STERIS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STERIS plc has no effect on the direction of Electromed i.e., Electromed and STERIS Plc go up and down completely randomly.

Pair Corralation between Electromed and STERIS Plc

Given the investment horizon of 90 days Electromed is expected to generate 2.26 times more return on investment than STERIS Plc. However, Electromed is 2.26 times more volatile than STERIS plc. It trades about 0.34 of its potential returns per unit of risk. STERIS plc is currently generating about -0.12 per unit of risk. If you would invest  1,725  in Electromed on September 3, 2024 and sell it today you would earn a total of  1,353  from holding Electromed or generate 78.43% return on investment over 90 days.

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

Electromed  vs.  STERIS plc

Electromed

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

STERIS plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STERIS plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Electromed and STERIS Plc

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

The idea behind Electromed and STERIS plc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.