Correlation Between Patterson Companies and EDAP TMS

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

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

Diversification Opportunities for Patterson Companies and EDAP TMS

0.36

Correlation Coefficient

Patterson Companies  EDAP TMS

Weak diversification

The 3 months correlation between Patterson and EDAP is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Patterson Companies 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 Patterson Companies 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 Patterson Companies 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 Patterson Companies i.e., Patterson Companies and EDAP TMS go up and down completely randomly.

Pair Corralation between Patterson Companies and EDAP TMS

Given the investment horizon of 90 days Patterson Companies is expected to generate 0.6 times more return on investment than EDAP TMS. However, Patterson Companies is 1.66 times less risky than EDAP TMS. It trades about -0.02 of its potential returns per unit of risk. EDAP TMS SA is currently generating about -0.17 per unit of risk. If you would invest  2,221  in Patterson Companies on August 30, 2024 and sell it today you would lose (77.00) from holding Patterson Companies or give up 3.47% of portfolio value over 90 days.

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

Patterson Companies  vs.  EDAP TMS SA

Patterson Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patterson Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Patterson Companies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 unfluctuating 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 Patterson Companies and EDAP TMS

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

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.