Correlation Between Electromed and Brainsway

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Can any of the company-specific risk be diversified away by investing in both Electromed and Brainsway 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 Electromed and Brainsway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electromed and Brainsway, you can compare the effects of market volatilities on Electromed and Brainsway 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 Electromed with a short position of Brainsway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electromed and Brainsway.

Diversification Opportunities for Electromed and Brainsway

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Electromed and Brainsway is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Brainsway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brainsway and Electromed 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 Electromed are associated (or correlated) with Brainsway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brainsway has no effect on the direction of Electromed i.e., Electromed and Brainsway go up and down completely randomly.

Pair Corralation between Electromed and Brainsway

Given the investment horizon of 90 days Electromed is expected to generate 0.84 times more return on investment than Brainsway. However, Electromed is 1.19 times less risky than Brainsway. It trades about 0.5 of its potential returns per unit of risk. Brainsway is currently generating about -0.02 per unit of risk. If you would invest  2,238  in Electromed on August 28, 2024 and sell it today you would earn a total of  811.00  from holding Electromed or generate 36.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Electromed  vs.  Brainsway

 Performance 
       Timeline  
Electromed 

Risk-Adjusted Performance

30 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.
Brainsway 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Brainsway are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Brainsway showed solid returns over the last few months and may actually be approaching a breakup point.

Electromed and Brainsway Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Electromed and Brainsway

The main advantage of trading using opposite Electromed and Brainsway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electromed position performs unexpectedly, Brainsway 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 Brainsway will offset losses from the drop in Brainsway's long position.
The idea behind Electromed and Brainsway 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.
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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