Correlation Between Embla Medical and Bactiquant

Can any of the company-specific risk be diversified away by investing in both Embla Medical and Bactiquant 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 Embla Medical and Bactiquant into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Embla Medical hf and Bactiquant AS, you can compare the effects of market volatilities on Embla Medical and Bactiquant 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 Embla Medical with a short position of Bactiquant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embla Medical and Bactiquant.

Diversification Opportunities for Embla Medical and Bactiquant

-0.78

Correlation Coefficient

Embla Medical  Bactiquant

Pay attention - limited upside

The 3 months correlation between Embla and Bactiquant is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Embla Medical hf and Bactiquant AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bactiquant AS and Embla Medical 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 Embla Medical hf are associated (or correlated) with Bactiquant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bactiquant AS has no effect on the direction of Embla Medical i.e., Embla Medical and Bactiquant go up and down completely randomly.

Pair Corralation between Embla Medical and Bactiquant

Assuming the 90 days trading horizon Embla Medical hf is expected to generate 0.3 times more return on investment than Bactiquant. However, Embla Medical hf is 3.34 times less risky than Bactiquant. It trades about 0.17 of its potential returns per unit of risk. Bactiquant AS is currently generating about -0.06 per unit of risk. If you would invest  3,080  in Embla Medical hf on September 14, 2024 and sell it today you would earn a total of  520.00  from holding Embla Medical hf or generate 16.88% return on investment over 90 days.

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

Embla Medical hf  vs.  Bactiquant AS

Embla Medical hf

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embla Medical hf are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Embla Medical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bactiquant AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bactiquant AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Embla Medical and Bactiquant

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

The idea behind Embla Medical hf and Bactiquant AS 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..