Correlation Between Embecta Corp and Aquagold International

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

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

Diversification Opportunities for Embecta Corp and Aquagold International

-0.5

Correlation Coefficient

Embecta Corp  Aquagold International

Very good diversification

The 3 months correlation between Embecta and Aquagold is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and Aquagold International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquagold International and Embecta Corp 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 Embecta Corp are associated (or correlated) with Aquagold International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquagold International has no effect on the direction of Embecta Corp i.e., Embecta Corp and Aquagold International go up and down completely randomly.

Pair Corralation between Embecta Corp and Aquagold International

Given the investment horizon of 90 days Embecta Corp is expected to generate 0.07 times more return on investment than Aquagold International. However, Embecta Corp is 14.36 times less risky than Aquagold International. It trades about 0.24 of its potential returns per unit of risk. Aquagold International is currently generating about -0.23 per unit of risk. If you would invest  1,960  in Embecta Corp on October 9, 2024 and sell it today you would earn a total of  133.00  from holding Embecta Corp or generate 6.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Embecta Corp  vs.  Aquagold International

Embecta Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embecta Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Embecta Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aquagold International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquagold International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Embecta Corp and Aquagold International

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

The idea behind Embecta Corp and Aquagold International 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.