Correlation Between Electromed and US Physicalrapy

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

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

Diversification Opportunities for Electromed and US Physicalrapy

0.78

Correlation Coefficient

Electromed  US Physicalrapy

Poor diversification

The 3 months correlation between Electromed and USPH is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and US Physicalrapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physicalrapy 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 US Physicalrapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Physicalrapy has no effect on the direction of Electromed i.e., Electromed and US Physicalrapy go up and down completely randomly.

Pair Corralation between Electromed and US Physicalrapy

Given the investment horizon of 90 days Electromed is expected to under-perform the US Physicalrapy. In addition to that, Electromed is 2.21 times more volatile than US Physicalrapy. It trades about -0.11 of its total potential returns per unit of risk. US Physicalrapy is currently generating about -0.22 per unit of volatility. If you would invest  8,872  in US Physicalrapy on December 29, 2024 and sell it today you would lose (1,679) from holding US Physicalrapy or give up 18.92% of portfolio value over 90 days.

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

Electromed  vs.  US Physicalrapy

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.

US Physicalrapy

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Physicalrapy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Electromed and US Physicalrapy

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

The idea behind Electromed and US Physicalrapy 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.