Correlation Between Baxter International and EDAP TMS
Can any of the company-specific risk be diversified away by investing in both Baxter International 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 Baxter International and EDAP TMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baxter International and EDAP TMS SA, you can compare the effects of market volatilities on Baxter International 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 Baxter International with a short position of EDAP TMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baxter International and EDAP TMS.
Diversification Opportunities for Baxter International and EDAP TMS
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baxter and EDAP is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International 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 Baxter International 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 Baxter International 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 Baxter International i.e., Baxter International and EDAP TMS go up and down completely randomly.
Pair Corralation between Baxter International and EDAP TMS
Considering the 90-day investment horizon Baxter International is expected to generate 0.49 times more return on investment than EDAP TMS. However, Baxter International is 2.02 times less risky than EDAP TMS. It trades about -0.11 of its potential returns per unit of risk. EDAP TMS SA is currently generating about -0.11 per unit of risk. If you would invest 3,734 in Baxter International on September 4, 2024 and sell it today you would lose (421.00) from holding Baxter International or give up 11.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baxter International vs. EDAP TMS SA
Performance |
| Timeline |
| Baxter International |
| EDAP TMS SA |
Baxter International and EDAP TMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baxter International and EDAP TMS
The main advantage of trading using opposite Baxter International and EDAP TMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baxter International 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.| Baxter International vs. Embecta Corp | Baxter International vs. West Pharmaceutical Services | Baxter International vs. ResMed Inc | Baxter International vs. The Cooper Companies, |
| EDAP TMS vs. Baxter International | EDAP TMS vs. West Pharmaceutical Services | EDAP TMS vs. ResMed Inc | EDAP TMS vs. The Cooper Companies, |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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