Correlation Between LivaNova PLC and Electromed

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

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

Diversification Opportunities for LivaNova PLC and Electromed

0.83

Correlation Coefficient

LivaNova PLC  Electromed

Very poor diversification

The 3 months correlation between LivaNova and Electromed is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding LivaNova PLC and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed and LivaNova PLC 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 LivaNova PLC are associated (or correlated) with Electromed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromed has no effect on the direction of LivaNova PLC i.e., LivaNova PLC and Electromed go up and down completely randomly.

Pair Corralation between LivaNova PLC and Electromed

Given the investment horizon of 90 days LivaNova PLC is expected to under-perform the Electromed. But the stock apears to be less risky and, when comparing its historical volatility, LivaNova PLC is 1.41 times less risky than Electromed. The stock trades about -0.04 of its potential returns per unit of risk. The Electromed is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  2,301  in Electromed on August 17, 2024 and sell it today you would earn a total of  580.00  from holding Electromed or generate 25.21% return on investment over 90 days.

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

LivaNova PLC  vs.  Electromed

LivaNova PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LivaNova PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, LivaNova PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Electromed

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LivaNova PLC and Electromed

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

The idea behind LivaNova PLC and Electromed 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.