Correlation Between Embecta Corp and BioLife Solutions

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

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

Diversification Opportunities for Embecta Corp and BioLife Solutions

0.48

Correlation Coefficient

Embecta Corp  BioLife Solutions

Very weak diversification

The 3 months correlation between Embecta and BioLife is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and BioLife Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLife Solutions 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 BioLife Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLife Solutions has no effect on the direction of Embecta Corp i.e., Embecta Corp and BioLife Solutions go up and down completely randomly.

Pair Corralation between Embecta Corp and BioLife Solutions

Given the investment horizon of 90 days Embecta Corp is expected to under-perform the BioLife Solutions. In addition to that, Embecta Corp is 1.12 times more volatile than BioLife Solutions. It trades about -0.26 of its total potential returns per unit of risk. BioLife Solutions is currently generating about 0.01 per unit of volatility. If you would invest  2,627  in BioLife Solutions on December 29, 2024 and sell it today you would lose (31.00) from holding BioLife Solutions or give up 1.18% of portfolio value over 90 days.

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

Embecta Corp  vs.  BioLife Solutions

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.

BioLife Solutions

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Embecta Corp and BioLife Solutions

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

The idea behind Embecta Corp and BioLife Solutions 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.