Correlation Between Embellence Group and Simris Alg

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

Diversification Opportunities for Embellence Group and Simris Alg

0.08

Correlation Coefficient

Embellence Group  Simris Alg

Significant diversification

The 3 months correlation between Embellence and Simris is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Embellence Group AB and Simris Alg AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simris Alg 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 Simris Alg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simris Alg AB has no effect on the direction of Embellence Group i.e., Embellence Group and Simris Alg go up and down completely randomly.

Pair Corralation between Embellence Group and Simris Alg

Assuming the 90 days trading horizon Embellence Group is expected to generate 2.6 times less return on investment than Simris Alg. But when comparing it to its historical volatility, Embellence Group AB is 5.76 times less risky than Simris Alg. It trades about 0.16 of its potential returns per unit of risk. Simris Alg AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7.72  in Simris Alg AB on December 2, 2024 and sell it today you would earn a total of  1.28  from holding Simris Alg AB or generate 16.58% return on investment over 90 days.

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

Embellence Group AB  vs.  Simris Alg 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 12 (%) 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.

Simris Alg AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simris Alg AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Simris Alg sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embellence Group and Simris Alg

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

The idea behind Embellence Group AB and Simris Alg 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.