Correlation Between Dynatronics and Escalon Medical

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

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

Diversification Opportunities for Dynatronics and Escalon Medical

0.19

Correlation Coefficient

Dynatronics  Escalon Medical

Average diversification

The 3 months correlation between Dynatronics and Escalon is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Dynatronics and Escalon Medical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escalon Medical Corp and Dynatronics 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 Dynatronics are associated (or correlated) with Escalon Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escalon Medical Corp has no effect on the direction of Dynatronics i.e., Dynatronics and Escalon Medical go up and down completely randomly.

Pair Corralation between Dynatronics and Escalon Medical

Given the investment horizon of 90 days Dynatronics is expected to under-perform the Escalon Medical. But the stock apears to be less risky and, when comparing its historical volatility, Dynatronics is 1.5 times less risky than Escalon Medical. The stock trades about -0.05 of its potential returns per unit of risk. The Escalon Medical Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Escalon Medical Corp on February 3, 2024 and sell it today you would lose (5.00) from holding Escalon Medical Corp or give up 45.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	37.45%
Values	Daily Returns

Dynatronics  vs.  Escalon Medical Corp

Dynatronics

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Dynatronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dynatronics is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Escalon Medical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Escalon Medical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Escalon Medical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dynatronics and Escalon Medical

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

The idea behind Dynatronics and Escalon Medical Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.