Correlation Between Embellence Group and AB Electrolux

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

Diversification Opportunities for Embellence Group and AB Electrolux

0.36

Correlation Coefficient

Embellence Group  AB Electrolux

Weak diversification

The 3 months correlation between Embellence and ELUX-B is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Embellence Group AB and AB Electrolux in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Electrolux 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 AB Electrolux. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Electrolux has no effect on the direction of Embellence Group i.e., Embellence Group and AB Electrolux go up and down completely randomly.

Pair Corralation between Embellence Group and AB Electrolux

Assuming the 90 days trading horizon Embellence Group AB is expected to generate 0.86 times more return on investment than AB Electrolux. However, Embellence Group AB is 1.16 times less risky than AB Electrolux. It trades about 0.1 of its potential returns per unit of risk. AB Electrolux is currently generating about 0.02 per unit of risk. If you would invest  2,340  in Embellence Group AB on December 4, 2024 and sell it today you would earn a total of  1,290  from holding Embellence Group AB or generate 55.13% return on investment over 90 days.

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

Embellence Group AB  vs.  AB Electrolux

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 11 (%) 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.

AB Electrolux

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AB Electrolux are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, AB Electrolux may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Embellence Group and AB Electrolux

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

The idea behind Embellence Group AB and AB Electrolux 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .