Correlation Between Embecta Corp and Kodiak Sciences

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

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

Diversification Opportunities for Embecta Corp and Kodiak Sciences

0.95

Correlation Coefficient

Embecta Corp  Kodiak Sciences

Almost no diversification

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

Pair Corralation between Embecta Corp and Kodiak Sciences

Given the investment horizon of 90 days Embecta Corp is expected to generate 0.52 times more return on investment than Kodiak Sciences. However, Embecta Corp is 1.91 times less risky than Kodiak Sciences. It trades about -0.25 of its potential returns per unit of risk. Kodiak Sciences is currently generating about -0.31 per unit of risk. If you would invest  2,027  in Embecta Corp on December 28, 2024 and sell it today you would lose (775.00) from holding Embecta Corp or give up 38.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Embecta Corp  vs.  Kodiak Sciences

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.

Kodiak Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kodiak Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators 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.

Pair Trading with Embecta Corp and Kodiak Sciences

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

The idea behind Embecta Corp and Kodiak Sciences 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.