Correlation Between NASDAQ TEST and EDAP TMS

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

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

Diversification Opportunities for NASDAQ TEST and EDAP TMS

-0.2

Correlation Coefficient

NASDAQ TEST  EDAP TMS

Good diversification

The 3 months correlation between NASDAQ and EDAP is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NASDAQ TEST STOCK 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 NASDAQ TEST 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 NASDAQ TEST STOCK 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 NASDAQ TEST i.e., NASDAQ TEST and EDAP TMS go up and down completely randomly.

Pair Corralation between NASDAQ TEST and EDAP TMS

Assuming the 90 days horizon NASDAQ TEST STOCK is expected to generate 6.65 times more return on investment than EDAP TMS. However, NASDAQ TEST is 6.65 times more volatile than EDAP TMS SA. It trades about 0.1 of its potential returns per unit of risk. EDAP TMS SA is currently generating about 0.0 per unit of risk. If you would invest  1,705  in NASDAQ TEST STOCK on January 27, 2025 and sell it today you would lose (485.00) from holding NASDAQ TEST STOCK or give up 28.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.13%
Values	Daily Returns

NASDAQ TEST STOCK  vs.  EDAP TMS SA

NASDAQ TEST STOCK

Risk-Adjusted Performance

OK

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

EDAP TMS SA

Risk-Adjusted Performance

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 relatively invariable basic indicators, EDAP TMS is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NASDAQ TEST and EDAP TMS

The main advantage of trading using opposite NASDAQ TEST and EDAP TMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NASDAQ TEST 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 NASDAQ TEST STOCK 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.