Correlation Between Cerus and Electromedical Technologies
Can any of the company-specific risk be diversified away by investing in both Cerus and Electromedical 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 Cerus and Electromedical Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cerus and Electromedical Technologies, you can compare the effects of market volatilities on Cerus and Electromedical 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 Cerus with a short position of Electromedical Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cerus and Electromedical Technologies.
Diversification Opportunities for Cerus and Electromedical Technologies
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cerus and Electromedical is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cerus and Electromedical Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromedical Technologies and Cerus 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 Cerus are associated (or correlated) with Electromedical Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromedical Technologies has no effect on the direction of Cerus i.e., Cerus and Electromedical Technologies go up and down completely randomly.
Pair Corralation between Cerus and Electromedical Technologies
Given the investment horizon of 90 days Cerus is expected to under-perform the Electromedical Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Cerus is 3.2 times less risky than Electromedical Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The Electromedical Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.10 in Electromedical Technologies on September 20, 2024 and sell it today you would lose (0.07) from holding Electromedical Technologies or give up 70.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cerus vs. Electromedical Technologies
Performance |
| Timeline |
| Cerus |
| Electromedical Technologies |
Cerus and Electromedical Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cerus and Electromedical Technologies
The main advantage of trading using opposite Cerus and Electromedical Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cerus position performs unexpectedly, Electromedical 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 Electromedical Technologies will offset losses from the drop in Electromedical Technologies' long position.The idea behind Cerus and Electromedical 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.| Electromedical Technologies vs. Abbott Laboratories | Electromedical Technologies vs. Stryker | Electromedical Technologies vs. Boston Scientific Corp | Electromedical Technologies vs. Medtronic PLC |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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