Correlation Between Nevro Corp and EDAP TMS

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

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

Diversification Opportunities for Nevro Corp and EDAP TMS

0.4

Correlation Coefficient

Nevro Corp  EDAP TMS

Very weak diversification

The 3 months correlation between Nevro and EDAP is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nevro Corp and EDAP TMS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDAP TMS SA and Nevro Corp 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 Nevro Corp are associated (or correlated) with EDAP TMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDAP TMS SA has no effect on the direction of Nevro Corp i.e., Nevro Corp and EDAP TMS go up and down completely randomly.

Pair Corralation between Nevro Corp and EDAP TMS

Given the investment horizon of 90 days Nevro Corp is expected to generate 1.15 times more return on investment than EDAP TMS. However, Nevro Corp is 1.15 times more volatile than EDAP TMS SA. It trades about 0.19 of its potential returns per unit of risk. EDAP TMS SA is currently generating about 0.03 per unit of risk. If you would invest  372.00  in Nevro Corp on December 27, 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Nevro Corp  vs.  EDAP TMS SA

Nevro Corp

Risk-Adjusted Performance

Good

Over the last 90 days Nevro Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

EDAP TMS SA

Risk-Adjusted Performance

Insignificant

Over the last 90 days EDAP TMS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, EDAP TMS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nevro Corp and EDAP TMS

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

The idea behind Nevro Corp and EDAP TMS SA 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..