Correlation Between Electromed and Nortech Systems
Can any of the company-specific risk be diversified away by investing in both Electromed and Nortech Systems 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 Nortech Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electromed and Nortech Systems Incorporated, you can compare the effects of market volatilities on Electromed and Nortech Systems 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 Nortech Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electromed and Nortech Systems.
Diversification Opportunities for Electromed and Nortech Systems
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Electromed and Nortech is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Nortech Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nortech Systems 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 Nortech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nortech Systems has no effect on the direction of Electromed i.e., Electromed and Nortech Systems go up and down completely randomly.
Pair Corralation between Electromed and Nortech Systems
Given the investment horizon of 90 days Electromed is expected to generate 0.82 times more return on investment than Nortech Systems. However, Electromed is 1.22 times less risky than Nortech Systems. It trades about 0.39 of its potential returns per unit of risk. Nortech Systems Incorporated is currently generating about -0.18 per unit of risk. If you would invest 2,308 in Electromed on August 25, 2024 and sell it today you would earn a total of 671.00 from holding Electromed or generate 29.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electromed vs. Nortech Systems Incorporated
Performance |
| Timeline |
| Electromed |
| Nortech Systems |
Electromed and Nortech Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electromed and Nortech Systems
The main advantage of trading using opposite Electromed and Nortech Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electromed position performs unexpectedly, Nortech Systems 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 Nortech Systems will offset losses from the drop in Nortech Systems' long position.| Electromed vs. Neuropace | Electromed vs. Orthopediatrics Corp | Electromed vs. SurModics | Electromed vs. Paragon 28 |
| Nortech Systems vs. Neuropace | Nortech Systems vs. Electromed | Nortech Systems vs. Orthopediatrics Corp | Nortech Systems vs. SurModics |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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