Correlation Between IRIDEX and Electromed

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

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

Diversification Opportunities for IRIDEX and Electromed

0.81

Correlation Coefficient

IRIDEX  Electromed

Very poor diversification

The 3 months correlation between IRIDEX and Electromed is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding IRIDEX and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed and IRIDEX 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 IRIDEX are associated (or correlated) with Electromed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromed has no effect on the direction of IRIDEX i.e., IRIDEX and Electromed go up and down completely randomly.

Pair Corralation between IRIDEX and Electromed

Given the investment horizon of 90 days IRIDEX is expected to under-perform the Electromed. In addition to that, IRIDEX is 1.98 times more volatile than Electromed. It trades about -0.1 of its total potential returns per unit of risk. Electromed is currently generating about -0.11 per unit of volatility. If you would invest  3,016  in Electromed on December 30, 2024 and sell it today you would lose (682.00) from holding Electromed or give up 22.61% of portfolio value over 90 days.

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

IRIDEX  vs.  Electromed

IRIDEX

Risk-Adjusted Performance

Very Weak

Over the last 90 days IRIDEX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward 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.

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.

Pair Trading with IRIDEX and Electromed

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

The idea behind IRIDEX and Electromed 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.