Correlation Between EDAP TMS and Baxter International
Can any of the company-specific risk be diversified away by investing in both EDAP TMS and Baxter International 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 EDAP TMS and Baxter International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDAP TMS SA and Baxter International, you can compare the effects of market volatilities on EDAP TMS and Baxter International 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 EDAP TMS with a short position of Baxter International. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDAP TMS and Baxter International.
Diversification Opportunities for EDAP TMS and Baxter International
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EDAP and Baxter is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding EDAP TMS SA and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International and EDAP TMS 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 EDAP TMS SA are associated (or correlated) with Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of EDAP TMS i.e., EDAP TMS and Baxter International go up and down completely randomly.
Pair Corralation between EDAP TMS and Baxter International
Given the investment horizon of 90 days EDAP TMS SA is expected to under-perform the Baxter International. In addition to that, EDAP TMS is 1.55 times more volatile than Baxter International. It trades about -0.13 of its total potential returns per unit of risk. Baxter International is currently generating about -0.19 per unit of volatility. If you would invest 3,562 in Baxter International on September 4, 2024 and sell it today you would lose (249.00) from holding Baxter International or give up 6.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EDAP TMS SA vs. Baxter International
Performance |
| Timeline |
| EDAP TMS SA |
| Baxter International |
EDAP TMS and Baxter International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDAP TMS and Baxter International
The main advantage of trading using opposite EDAP TMS and Baxter International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDAP TMS position performs unexpectedly, Baxter International 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 Baxter International will offset losses from the drop in Baxter International's long position.| EDAP TMS vs. Baxter International | EDAP TMS vs. West Pharmaceutical Services | EDAP TMS vs. ResMed Inc | EDAP TMS vs. The Cooper Companies, |
| Baxter International vs. Embecta Corp | Baxter International vs. West Pharmaceutical Services | Baxter International vs. ResMed Inc | Baxter International 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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