Correlation Between EDAP TMS and Retractable Technologies

Can any of the company-specific risk be diversified away by investing in both EDAP TMS and Retractable 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 EDAP TMS and Retractable Technologies 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 Retractable Technologies, you can compare the effects of market volatilities on EDAP TMS and Retractable 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 EDAP TMS with a short position of Retractable Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDAP TMS and Retractable Technologies.

Diversification Opportunities for EDAP TMS and Retractable Technologies

0.86

Correlation Coefficient

EDAP TMS  Retractable Technologies

Very poor diversification

The 3 months correlation between EDAP and Retractable is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding EDAP TMS SA and Retractable Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retractable Technologies 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 Retractable Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retractable Technologies has no effect on the direction of EDAP TMS i.e., EDAP TMS and Retractable Technologies go up and down completely randomly.

Pair Corralation between EDAP TMS and Retractable Technologies

Given the investment horizon of 90 days EDAP TMS SA is expected to under-perform the Retractable Technologies. In addition to that, EDAP TMS is 1.32 times more volatile than Retractable Technologies. It trades about -0.08 of its total potential returns per unit of risk. Retractable Technologies is currently generating about -0.05 per unit of volatility. If you would invest  136.00  in Retractable Technologies on September 4, 2024 and sell it today you would lose (73.00) from holding Retractable Technologies or give up 53.68% of portfolio value over 90 days.

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

EDAP TMS SA  vs.  Retractable Technologies

EDAP TMS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDAP TMS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Retractable Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retractable Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with EDAP TMS and Retractable Technologies

The main advantage of trading using opposite EDAP TMS and Retractable Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDAP TMS position performs unexpectedly, Retractable 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 Retractable Technologies will offset losses from the drop in Retractable Technologies' long position.

The idea behind EDAP TMS SA and Retractable 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.