Correlation Between Electromed and Beyond Air

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

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

Diversification Opportunities for Electromed and Beyond Air

0.75

Correlation Coefficient

Electromed  Beyond Air

Poor diversification

The 3 months correlation between Electromed and Beyond is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Beyond Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beyond Air 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 Beyond Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beyond Air has no effect on the direction of Electromed i.e., Electromed and Beyond Air go up and down completely randomly.

Pair Corralation between Electromed and Beyond Air

Given the investment horizon of 90 days Electromed is expected to generate 0.35 times more return on investment than Beyond Air. However, Electromed is 2.87 times less risky than Beyond Air. It trades about 0.21 of its potential returns per unit of risk. Beyond Air is currently generating about 0.07 per unit of risk. If you would invest  2,034  in Electromed on September 18, 2024 and sell it today you would earn a total of  808.00  from holding Electromed or generate 39.72% return on investment over 90 days.

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

Electromed  vs.  Beyond Air

Electromed

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Beyond Air

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beyond Air are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward indicators, Beyond Air reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electromed and Beyond Air

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

The idea behind Electromed and Beyond Air 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.