Correlation Between Treace Medical and Electromed

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

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

Diversification Opportunities for Treace Medical and Electromed

0.42

Correlation Coefficient

Treace Medical  Electromed

Very weak diversification

The 3 months correlation between Treace and Electromed is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Treace Medical Concepts and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed and Treace Medical 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 Treace Medical Concepts 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 Treace Medical i.e., Treace Medical and Electromed go up and down completely randomly.

Pair Corralation between Treace Medical and Electromed

Given the investment horizon of 90 days Treace Medical Concepts is expected to generate 1.18 times more return on investment than Electromed. However, Treace Medical is 1.18 times more volatile than Electromed. It trades about 0.1 of its potential returns per unit of risk. Electromed is currently generating about -0.11 per unit of risk. If you would invest  688.00  in Treace Medical Concepts on December 30, 2024 and sell it today you would earn a total of  157.00  from holding Treace Medical Concepts or generate 22.82% return on investment over 90 days.

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

Treace Medical Concepts  vs.  Electromed

Treace Medical Concepts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Treace Medical Concepts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Treace Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 Treace Medical and Electromed

The main advantage of trading using opposite Treace Medical and Electromed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treace Medical 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 Treace Medical Concepts 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.