Correlation Between Embecta Corp and ResMed

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

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

Diversification Opportunities for Embecta Corp and ResMed

0.5

Correlation Coefficient

Embecta Corp  ResMed

Very weak diversification

The 3 months correlation between Embecta and ResMed is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Embecta Corp i.e., Embecta Corp and ResMed go up and down completely randomly.

Pair Corralation between Embecta Corp and ResMed

Given the investment horizon of 90 days Embecta Corp is expected to under-perform the ResMed. In addition to that, Embecta Corp is 1.59 times more volatile than ResMed Inc. It trades about -0.26 of its total potential returns per unit of risk. ResMed Inc is currently generating about -0.02 per unit of volatility. If you would invest  22,899  in ResMed Inc on December 29, 2024 and sell it today you would lose (637.00) from holding ResMed Inc or give up 2.78% 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.  ResMed Inc

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.

ResMed Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ResMed Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, ResMed 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 ResMed

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

The idea behind Embecta Corp and ResMed Inc 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.