Correlation Between Embellence Group and BoMill AB

Can any of the company-specific risk be diversified away by investing in both Embellence Group and BoMill 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 BoMill 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 BoMill AB, you can compare the effects of market volatilities on Embellence Group and BoMill 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 BoMill AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embellence Group and BoMill AB.

Diversification Opportunities for Embellence Group and BoMill AB

-0.61

Correlation Coefficient

Embellence Group  BoMill AB

Excellent diversification

The 3 months correlation between Embellence and BoMill is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Embellence Group AB and BoMill AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BoMill 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 BoMill AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BoMill AB has no effect on the direction of Embellence Group i.e., Embellence Group and BoMill AB go up and down completely randomly.

Pair Corralation between Embellence Group and BoMill AB

Assuming the 90 days trading horizon Embellence Group AB is expected to under-perform the BoMill AB. But the stock apears to be less risky and, when comparing its historical volatility, Embellence Group AB is 1.96 times less risky than BoMill AB. The stock trades about 0.0 of its potential returns per unit of risk. The BoMill AB is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  96.00  in BoMill AB on October 8, 2024 and sell it today you would earn a total of  44.00  from holding BoMill AB or generate 45.83% return on investment over 90 days.

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

Embellence Group AB  vs.  BoMill AB

Embellence Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embellence Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Embellence Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

BoMill AB

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BoMill AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, BoMill AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embellence Group and BoMill AB

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

The idea behind Embellence Group AB and BoMill 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.