Correlation Between Electrocore LLC and Varex Imaging

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

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

Diversification Opportunities for Electrocore LLC and Varex Imaging

0.74

Correlation Coefficient

Electrocore LLC  Varex Imaging

Poor diversification

The 3 months correlation between Electrocore and Varex is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Electrocore LLC and Varex Imaging Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varex Imaging Corp and Electrocore LLC 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 Electrocore LLC are associated (or correlated) with Varex Imaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varex Imaging Corp has no effect on the direction of Electrocore LLC i.e., Electrocore LLC and Varex Imaging go up and down completely randomly.

Pair Corralation between Electrocore LLC and Varex Imaging

Given the investment horizon of 90 days Electrocore LLC is expected to generate 3.5 times more return on investment than Varex Imaging. However, Electrocore LLC is 3.5 times more volatile than Varex Imaging Corp. It trades about 0.29 of its potential returns per unit of risk. Varex Imaging Corp is currently generating about -0.44 per unit of risk. If you would invest  1,135  in Electrocore LLC on September 24, 2024 and sell it today you would earn a total of  392.00  from holding Electrocore LLC or generate 34.54% return on investment over 90 days.

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

Electrocore LLC  vs.  Varex Imaging Corp

Electrocore LLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electrocore LLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Electrocore LLC reported solid returns over the last few months and may actually be approaching a breakup point.

Varex Imaging Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Varex Imaging Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Varex Imaging showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electrocore LLC and Varex Imaging

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

The idea behind Electrocore LLC and Varex Imaging 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.