Correlation Between Embecta Corp and Spine Injury

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

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

Diversification Opportunities for Embecta Corp and Spine Injury

0.78

Correlation Coefficient

Embecta Corp  Spine Injury

Poor diversification

The 3 months correlation between Embecta and Spine is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and Spine Injury Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spine Injury 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 Spine Injury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spine Injury Solutions has no effect on the direction of Embecta Corp i.e., Embecta Corp and Spine Injury go up and down completely randomly.

Pair Corralation between Embecta Corp and Spine Injury

Given the investment horizon of 90 days Embecta Corp is expected to generate 2.41 times more return on investment than Spine Injury. However, Embecta Corp is 2.41 times more volatile than Spine Injury Solutions. It trades about 0.04 of its potential returns per unit of risk. Spine Injury Solutions is currently generating about -0.09 per unit of risk. If you would invest  1,960  in Embecta Corp on October 10, 2024 and sell it today you would earn a total of  20.00  from holding Embecta Corp or generate 1.02% return on investment over 90 days.

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

Embecta Corp  vs.  Spine Injury Solutions

Embecta Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embecta Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Embecta Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Spine Injury Solutions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spine Injury Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Spine Injury is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Embecta Corp and Spine Injury

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

The idea behind Embecta Corp and Spine Injury 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.