Correlation Between Embellence Group and Rottneros

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

Diversification Opportunities for Embellence Group and Rottneros

0.37

Correlation Coefficient

Embellence Group  Rottneros

Weak diversification

The 3 months correlation between Embellence and Rottneros is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Embellence Group AB and Rottneros AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rottneros 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 Rottneros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rottneros AB has no effect on the direction of Embellence Group i.e., Embellence Group and Rottneros go up and down completely randomly.

Pair Corralation between Embellence Group and Rottneros

Assuming the 90 days trading horizon Embellence Group AB is expected to generate 1.05 times more return on investment than Rottneros. However, Embellence Group is 1.05 times more volatile than Rottneros AB. It trades about 0.06 of its potential returns per unit of risk. Rottneros AB is currently generating about -0.03 per unit of risk. If you would invest  1,886  in Embellence Group AB on October 23, 2024 and sell it today you would earn a total of  1,444  from holding Embellence Group AB or generate 76.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Embellence Group AB  vs.  Rottneros AB

Embellence Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Embellence Group AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Rottneros AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rottneros AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rottneros is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Embellence Group and Rottneros

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

The idea behind Embellence Group AB and Rottneros 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.