Correlation Between Electromed and Nexalin Technology

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

By analyzing existing cross correlation between Electromed and Nexalin Technology, you can compare the effects of market volatilities on Electromed and Nexalin Technology 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 Nexalin Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electromed and Nexalin Technology.

Diversification Opportunities for Electromed and Nexalin Technology

0.85

Correlation Coefficient

Electromed  Nexalin Technology

Very poor diversification

The 3 months correlation between Electromed and Nexalin is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Nexalin Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexalin Technology 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 Nexalin Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexalin Technology has no effect on the direction of Electromed i.e., Electromed and Nexalin Technology go up and down completely randomly.

Pair Corralation between Electromed and Nexalin Technology

Given the investment horizon of 90 days Electromed is expected to generate 3.26 times less return on investment than Nexalin Technology. But when comparing it to its historical volatility, Electromed is 4.42 times less risky than Nexalin Technology. It trades about 0.34 of its potential returns per unit of risk. Nexalin Technology is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Nexalin Technology on August 31, 2024 and sell it today you would earn a total of  337.00  from holding Nexalin Technology or generate 374.44% return on investment over 90 days.

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

Electromed  vs.  Nexalin Technology

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.

Nexalin Technology

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nexalin Technology are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Nexalin Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electromed and Nexalin Technology

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

The idea behind Electromed and Nexalin Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.