Correlation Between Embellence Group and RVRC Holding

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

Diversification Opportunities for Embellence Group and RVRC Holding

0.53

Correlation Coefficient

Embellence Group  RVRC Holding

Very weak diversification

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

Pair Corralation between Embellence Group and RVRC Holding

Assuming the 90 days trading horizon Embellence Group AB is expected to generate 0.92 times more return on investment than RVRC Holding. However, Embellence Group AB is 1.08 times less risky than RVRC Holding. It trades about 0.18 of its potential returns per unit of risk. RVRC Holding AB is currently generating about 0.09 per unit of risk. If you would invest  2,950  in Embellence Group AB on December 25, 2024 and sell it today you would earn a total of  710.00  from holding Embellence Group AB or generate 24.07% return on investment over 90 days.

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

Embellence Group AB  vs.  RVRC Holding 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 14 (%) 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.

RVRC Holding AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RVRC Holding AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, RVRC Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embellence Group and RVRC Holding

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

The idea behind Embellence Group AB and RVRC Holding 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 Anywhere module to track or share privately all of your investments from the convenience of any device.