Correlation Between Cutera and EDAP TMS

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

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

Diversification Opportunities for Cutera and EDAP TMS

0.61

Correlation Coefficient

Cutera  EDAP TMS

Poor diversification

The 3 months correlation between Cutera and EDAP is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cutera 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 Cutera 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 Cutera 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 Cutera i.e., Cutera and EDAP TMS go up and down completely randomly.

Pair Corralation between Cutera and EDAP TMS

Given the investment horizon of 90 days Cutera Inc is expected to under-perform the EDAP TMS. In addition to that, Cutera is 2.17 times more volatile than EDAP TMS SA. It trades about -0.05 of its total potential returns per unit of risk. EDAP TMS SA is currently generating about -0.11 per unit of volatility. If you would invest  321.00  in EDAP TMS SA on September 4, 2024 and sell it today you would lose (74.00) from holding EDAP TMS SA or give up 23.05% of portfolio value over 90 days.

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

Cutera Inc  vs.  EDAP TMS SA

Cutera Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cutera Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

EDAP TMS SA

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Cutera and EDAP TMS

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

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.