Correlation Between Embecta Corp and Eureka Acquisition

Can any of the company-specific risk be diversified away by investing in both Embecta Corp and Eureka 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 Eureka 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 Eureka Acquisition Corp, you can compare the effects of market volatilities on Embecta Corp and Eureka 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 Eureka Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embecta Corp and Eureka Acquisition.

Diversification Opportunities for Embecta Corp and Eureka Acquisition

-0.95

Correlation Coefficient

Embecta Corp  Eureka Acquisition

Pay attention - limited upside

The 3 months correlation between Embecta and Eureka is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and Eureka Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eureka 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 Eureka Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eureka Acquisition Corp has no effect on the direction of Embecta Corp i.e., Embecta Corp and Eureka Acquisition go up and down completely randomly.

Pair Corralation between Embecta Corp and Eureka Acquisition

Given the investment horizon of 90 days Embecta Corp is expected to under-perform the Eureka Acquisition. In addition to that, Embecta Corp is 29.95 times more volatile than Eureka Acquisition Corp. It trades about -0.26 of its total potential returns per unit of risk. Eureka Acquisition Corp is currently generating about 0.21 per unit of volatility. If you would invest  1,015  in Eureka Acquisition Corp on December 29, 2024 and sell it today you would earn a total of  13.00  from holding Eureka Acquisition Corp or generate 1.28% return on investment over 90 days.

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

Embecta Corp  vs.  Eureka 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.

Eureka Acquisition Corp

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Eureka Acquisition Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Eureka Acquisition is not utilizing all of its potentials. The new stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Embecta Corp and Eureka Acquisition

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

The idea behind Embecta Corp and Eureka 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.