Correlation Between Nexalin Technology and EDAP TMS

Can any of the company-specific risk be diversified away by investing in both Nexalin Technology 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 Nexalin Technology and EDAP TMS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nexalin Technology and EDAP TMS SA, you can compare the effects of market volatilities on Nexalin Technology 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 Nexalin Technology with a short position of EDAP TMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexalin Technology and EDAP TMS.

Diversification Opportunities for Nexalin Technology and EDAP TMS

0.65

Correlation Coefficient

Nexalin Technology  EDAP TMS

Poor diversification

The 3 months correlation between Nexalin and EDAP is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nexalin Technology 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 Nexalin Technology 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 Nexalin Technology 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 Nexalin Technology i.e., Nexalin Technology and EDAP TMS go up and down completely randomly.

Pair Corralation between Nexalin Technology and EDAP TMS

Considering the 90-day investment horizon Nexalin Technology is expected to generate 2.96 times more return on investment than EDAP TMS. However, Nexalin Technology is 2.96 times more volatile than EDAP TMS SA. It trades about 0.07 of its potential returns per unit of risk. EDAP TMS SA is currently generating about -0.02 per unit of risk. If you would invest  84.00  in Nexalin Technology on February 5, 2024 and sell it today you would earn a total of  60.00  from holding Nexalin Technology or generate 71.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Nexalin Technology  vs.  EDAP TMS SA

Nexalin Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nexalin Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Nexalin Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

EDAP TMS SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EDAP TMS SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, EDAP TMS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexalin Technology and EDAP TMS

The main advantage of trading using opposite Nexalin Technology and EDAP TMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexalin Technology 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.

The idea behind Nexalin Technology and EDAP TMS SA 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.