Correlation Between Embla Medical and Danske Andelskassers

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

Diversification Opportunities for Embla Medical and Danske Andelskassers

-0.42

Correlation Coefficient

Embla Medical  Danske Andelskassers

Very good diversification

The 3 months correlation between Embla and Danske is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Embla Medical hf and Danske Andelskassers Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Andelskassers Bank 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 Danske Andelskassers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Andelskassers Bank has no effect on the direction of Embla Medical i.e., Embla Medical and Danske Andelskassers go up and down completely randomly.

Pair Corralation between Embla Medical and Danske Andelskassers

Assuming the 90 days trading horizon Embla Medical hf is expected to under-perform the Danske Andelskassers. But the stock apears to be less risky and, when comparing its historical volatility, Embla Medical hf is 1.12 times less risky than Danske Andelskassers. The stock trades about -0.2 of its potential returns per unit of risk. The Danske Andelskassers Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,425  in Danske Andelskassers Bank on December 30, 2024 and sell it today you would earn a total of  55.00  from holding Danske Andelskassers Bank or generate 3.86% return on investment over 90 days.

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

Embla Medical hf  vs.  Danske Andelskassers Bank

Embla Medical hf

Risk-Adjusted Performance

Very Weak

Over the last 90 days Embla Medical hf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Danske Andelskassers Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Andelskassers Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Danske Andelskassers is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Embla Medical and Danske Andelskassers

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

The idea behind Embla Medical hf and Danske Andelskassers Bank 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.