Correlation Between Pro Dex and SANUWAVE Health

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

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

Diversification Opportunities for Pro Dex and SANUWAVE Health

0.79

Correlation Coefficient

Pro Dex  SANUWAVE Health

Poor diversification

The 3 months correlation between Pro and SANUWAVE is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Pro Dex and SANUWAVE Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANUWAVE Health and Pro Dex 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 Pro Dex are associated (or correlated) with SANUWAVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANUWAVE Health has no effect on the direction of Pro Dex i.e., Pro Dex and SANUWAVE Health go up and down completely randomly.

Pair Corralation between Pro Dex and SANUWAVE Health

Given the investment horizon of 90 days Pro Dex is expected to generate 9.27 times less return on investment than SANUWAVE Health. But when comparing it to its historical volatility, Pro Dex is 18.45 times less risky than SANUWAVE Health. It trades about 0.18 of its potential returns per unit of risk. SANUWAVE Health is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  675.00  in SANUWAVE Health on October 7, 2024 and sell it today you would earn a total of  1,526  from holding SANUWAVE Health or generate 226.07% return on investment over 90 days.

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

Pro Dex  vs.  SANUWAVE Health

Pro Dex

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Dex are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pro Dex showed solid returns over the last few months and may actually be approaching a breakup point.

SANUWAVE Health

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Pro Dex and SANUWAVE Health

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

The idea behind Pro Dex and SANUWAVE Health 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.