Correlation Between Beyond Air and Electromed

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

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

Diversification Opportunities for Beyond Air and Electromed

0.76

Correlation Coefficient

Beyond Air  Electromed

Poor diversification

The 3 months correlation between Beyond and Electromed is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Beyond Air and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed and Beyond Air 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 Beyond Air are associated (or correlated) with Electromed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromed has no effect on the direction of Beyond Air i.e., Beyond Air and Electromed go up and down completely randomly.

Pair Corralation between Beyond Air and Electromed

Given the investment horizon of 90 days Beyond Air is expected to generate 1.48 times less return on investment than Electromed. In addition to that, Beyond Air is 2.72 times more volatile than Electromed. It trades about 0.06 of its total potential returns per unit of risk. Electromed is currently generating about 0.25 per unit of volatility. If you would invest  1,841  in Electromed on September 15, 2024 and sell it today you would earn a total of  977.00  from holding Electromed or generate 53.07% return on investment over 90 days.

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

Beyond Air  vs.  Electromed

Beyond Air

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beyond Air are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting forward indicators, Beyond Air reported solid returns over the last few months and may actually be approaching a breakup point.

Electromed

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beyond Air and Electromed

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

The idea behind Beyond Air and Electromed 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.