Correlation Between ResMed and EDAP TMS

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

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

Diversification Opportunities for ResMed and EDAP TMS

0.08

Correlation Coefficient

ResMed  EDAP TMS

Significant diversification

The 3 months correlation between ResMed and EDAP is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ResMed Inc 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 ResMed 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 ResMed Inc 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 ResMed i.e., ResMed and EDAP TMS go up and down completely randomly.

Pair Corralation between ResMed and EDAP TMS

Considering the 90-day investment horizon ResMed Inc is expected to under-perform the EDAP TMS. But the stock apears to be less risky and, when comparing its historical volatility, ResMed Inc is 1.94 times less risky than EDAP TMS. The stock trades about -0.03 of its potential returns per unit of risk. The EDAP TMS SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  217.00  in EDAP TMS SA on December 27, 2024 and sell it today you would lose (12.00) from holding EDAP TMS SA or give up 5.53% of portfolio value over 90 days.

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

ResMed Inc  vs.  EDAP TMS SA

ResMed Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ResMed Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, ResMed is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

EDAP TMS SA

Risk-Adjusted Performance

Very Weak

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 invariable basic indicators, EDAP TMS is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ResMed and EDAP TMS

The main advantage of trading using opposite ResMed and EDAP TMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ResMed 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 ResMed Inc 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.