Correlation Between Embecta Corp and NeueHealth

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

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

Diversification Opportunities for Embecta Corp and NeueHealth

0.25

Correlation Coefficient

Embecta Corp  NeueHealth

Modest diversification

The 3 months correlation between Embecta and NeueHealth is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and NeueHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeueHealth 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 NeueHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeueHealth has no effect on the direction of Embecta Corp i.e., Embecta Corp and NeueHealth go up and down completely randomly.

Pair Corralation between Embecta Corp and NeueHealth

Given the investment horizon of 90 days Embecta Corp is expected to under-perform the NeueHealth. But the stock apears to be less risky and, when comparing its historical volatility, Embecta Corp is 1.45 times less risky than NeueHealth. The stock trades about -0.26 of its potential returns per unit of risk. The NeueHealth is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  740.00  in NeueHealth on December 30, 2024 and sell it today you would lose (55.00) from holding NeueHealth or give up 7.43% of portfolio value over 90 days.

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

Embecta Corp  vs.  NeueHealth

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.

NeueHealth

Risk-Adjusted Performance

Very Weak

Over the last 90 days NeueHealth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, NeueHealth is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Embecta Corp and NeueHealth

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

The idea behind Embecta Corp and NeueHealth 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.