Correlation Between Electromed and Anika Therapeutics

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

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

Diversification Opportunities for Electromed and Anika Therapeutics

-0.77

Correlation Coefficient

Electromed  Anika Therapeutics

Pay attention - limited upside

The 3 months correlation between Electromed and Anika is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Anika Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anika Therapeutics and Electromed 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 Electromed are associated (or correlated) with Anika Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anika Therapeutics has no effect on the direction of Electromed i.e., Electromed and Anika Therapeutics go up and down completely randomly.

Pair Corralation between Electromed and Anika Therapeutics

Given the investment horizon of 90 days Electromed is expected to generate 1.27 times more return on investment than Anika Therapeutics. However, Electromed is 1.27 times more volatile than Anika Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Anika Therapeutics is currently generating about -0.03 per unit of risk. If you would invest  1,009  in Electromed on August 31, 2024 and sell it today you would earn a total of  2,097  from holding Electromed or generate 207.83% return on investment over 90 days.

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

Electromed  vs.  Anika Therapeutics

Electromed

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Anika Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anika Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Electromed and Anika Therapeutics

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

The idea behind Electromed and Anika Therapeutics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.