Correlation Between BankIn Bredygt and Embla Medical

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

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

Diversification Opportunities for BankIn Bredygt and Embla Medical

0.8

Correlation Coefficient

BankIn Bredygt  Embla Medical

Very poor diversification

The 3 months correlation between BankIn and Embla is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BankIn Bredygt Klimaakt and Embla Medical hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embla Medical hf and BankIn Bredygt 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 BankIn Bredygt Klimaakt are associated (or correlated) with Embla Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embla Medical hf has no effect on the direction of BankIn Bredygt i.e., BankIn Bredygt and Embla Medical go up and down completely randomly.

Pair Corralation between BankIn Bredygt and Embla Medical

Assuming the 90 days trading horizon BankIn Bredygt is expected to generate 2.22 times less return on investment than Embla Medical. But when comparing it to its historical volatility, BankIn Bredygt Klimaakt is 1.22 times less risky than Embla Medical. It trades about 0.13 of its potential returns per unit of risk. Embla Medical hf is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,040  in Embla Medical hf on September 12, 2024 and sell it today you would earn a total of  700.00  from holding Embla Medical hf or generate 23.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	73.44%
Values	Daily Returns

BankIn Bredygt Klimaakt  vs.  Embla Medical hf

BankIn Bredygt Klimaakt

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BankIn Bredygt Klimaakt are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, BankIn Bredygt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Embla Medical hf

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Embla Medical hf are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Embla Medical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BankIn Bredygt and Embla Medical

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

The idea behind BankIn Bredygt Klimaakt and Embla Medical hf 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.