Correlation Between Embla Medical and Danske Invest

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

Diversification Opportunities for Embla Medical and Danske Invest

0.61

Correlation Coefficient

Embla Medical  Danske Invest

Poor diversification

The 3 months correlation between Embla and Danske is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Embla Medical hf and Danske Invest Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Invest Euro 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 Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Invest Euro has no effect on the direction of Embla Medical i.e., Embla Medical and Danske Invest go up and down completely randomly.

Pair Corralation between Embla Medical and Danske Invest

Assuming the 90 days trading horizon Embla Medical hf is expected to generate 9.4 times more return on investment than Danske Invest. However, Embla Medical is 9.4 times more volatile than Danske Invest Euro. It trades about 0.09 of its potential returns per unit of risk. Danske Invest Euro is currently generating about 0.13 per unit of risk. If you would invest  3,430  in Embla Medical hf on October 6, 2024 and sell it today you would earn a total of  170.00  from holding Embla Medical hf or generate 4.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.5%
Values	Daily Returns

Embla Medical hf  vs.  Danske Invest Euro

Embla Medical hf

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embla Medical hf are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Embla Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Danske Invest Euro

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Invest Euro are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Danske Invest 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 Invest

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

The idea behind Embla Medical hf and Danske Invest Euro 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.