Correlation Between Electromed and Retractable Technologies

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

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

Diversification Opportunities for Electromed and Retractable Technologies

-0.91

Correlation Coefficient

Electromed  Retractable Technologies

Pay attention - limited upside

The 3 months correlation between Electromed and Retractable is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Retractable Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retractable Technologies 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 Retractable Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retractable Technologies has no effect on the direction of Electromed i.e., Electromed and Retractable Technologies go up and down completely randomly.

Pair Corralation between Electromed and Retractable Technologies

Given the investment horizon of 90 days Electromed is expected to generate 0.92 times more return on investment than Retractable Technologies. However, Electromed is 1.09 times less risky than Retractable Technologies. It trades about 0.34 of its potential returns per unit of risk. Retractable Technologies is currently generating about -0.19 per unit of risk. If you would invest  1,725  in Electromed on August 31, 2024 and sell it today you would earn a total of  1,381  from holding Electromed or generate 80.06% return on investment over 90 days.

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

Electromed  vs.  Retractable Technologies

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.

Retractable Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retractable Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Electromed and Retractable Technologies

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

The idea behind Electromed and Retractable 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.