Correlation Between Stryker and Electromedical Technologies

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

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

Diversification Opportunities for Stryker and Electromedical Technologies

-0.31

Correlation Coefficient

Stryker  Electromedical Technologies

Very good diversification

The 3 months correlation between Stryker and Electromedical is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Electromedical Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromedical Technologies and Stryker 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 Stryker are associated (or correlated) with Electromedical Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromedical Technologies has no effect on the direction of Stryker i.e., Stryker and Electromedical Technologies go up and down completely randomly.

Pair Corralation between Stryker and Electromedical Technologies

Considering the 90-day investment horizon Stryker is expected to generate 4.08 times less return on investment than Electromedical Technologies. But when comparing it to its historical volatility, Stryker is 10.89 times less risky than Electromedical Technologies. It trades about 0.07 of its potential returns per unit of risk. Electromedical Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Electromedical Technologies on September 23, 2024 and sell it today you would lose (0.57) from holding Electromedical Technologies or give up 95.0% of portfolio value over 90 days.

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

Stryker  vs.  Electromedical Technologies

Stryker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stryker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Stryker is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Electromedical Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Electromedical Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Electromedical Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stryker and Electromedical Technologies

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

The idea behind Stryker and Electromedical Technologies 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.