Correlation Between Embecta Corp and Bayview Acquisition

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

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

Diversification Opportunities for Embecta Corp and Bayview Acquisition

0.3

Correlation Coefficient

Embecta Corp  Bayview Acquisition

Weak diversification

The 3 months correlation between Embecta and Bayview is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and Bayview Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayview Acquisition Corp 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 Bayview Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayview Acquisition Corp has no effect on the direction of Embecta Corp i.e., Embecta Corp and Bayview Acquisition go up and down completely randomly.

Pair Corralation between Embecta Corp and Bayview Acquisition

Given the investment horizon of 90 days Embecta Corp is expected to under-perform the Bayview Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Embecta Corp is 3.5 times less risky than Bayview Acquisition. The stock trades about -0.26 of its potential returns per unit of risk. The Bayview Acquisition Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Bayview Acquisition Corp on December 29, 2024 and sell it today you would earn a total of  6.00  from holding Bayview Acquisition Corp or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	47.54%
Values	Daily Returns

Embecta Corp  vs.  Bayview Acquisition Corp

Embecta Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Embecta Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bayview Acquisition Corp

Risk-Adjusted Performance

Good

Over the last 90 days Bayview Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively fragile basic indicators, Bayview Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embecta Corp and Bayview Acquisition

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

The idea behind Embecta Corp and Bayview Acquisition 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.