Correlation Between Embellence Group and AddLife AB

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

By analyzing existing cross correlation between Embellence Group AB and AddLife AB, you can compare the effects of market volatilities on Embellence Group and AddLife AB 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 Embellence Group with a short position of AddLife AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embellence Group and AddLife AB.

Diversification Opportunities for Embellence Group and AddLife AB

0.53

Correlation Coefficient

Embellence Group  AddLife AB

Very weak diversification

The 3 months correlation between Embellence and AddLife is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Embellence Group AB and AddLife AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AddLife AB and Embellence Group 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 Embellence Group AB are associated (or correlated) with AddLife AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AddLife AB has no effect on the direction of Embellence Group i.e., Embellence Group and AddLife AB go up and down completely randomly.

Pair Corralation between Embellence Group and AddLife AB

Assuming the 90 days trading horizon Embellence Group AB is expected to generate 0.74 times more return on investment than AddLife AB. However, Embellence Group AB is 1.35 times less risky than AddLife AB. It trades about 0.18 of its potential returns per unit of risk. AddLife AB is currently generating about 0.04 per unit of risk. If you would invest  2,950  in Embellence Group AB on December 27, 2024 and sell it today you would earn a total of  700.00  from holding Embellence Group AB or generate 23.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Embellence Group AB  vs.  AddLife AB

Embellence Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embellence Group AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Embellence Group sustained solid returns over the last few months and may actually be approaching a breakup point.

AddLife AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AddLife AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, AddLife AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Embellence Group and AddLife AB

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

The idea behind Embellence Group AB and AddLife AB 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.