Correlation Between Embla Medical and Nordea Bank

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

Diversification Opportunities for Embla Medical and Nordea Bank

-0.74

Correlation Coefficient

Embla Medical  Nordea Bank

Pay attention - limited upside

The 3 months correlation between Embla and Nordea is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Embla Medical hf and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp 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 Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of Embla Medical i.e., Embla Medical and Nordea Bank go up and down completely randomly.

Pair Corralation between Embla Medical and Nordea Bank

Assuming the 90 days trading horizon Embla Medical hf is expected to under-perform the Nordea Bank. In addition to that, Embla Medical is 1.31 times more volatile than Nordea Bank Abp. It trades about -0.22 of its total potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.13 per unit of volatility. If you would invest  7,958  in Nordea Bank Abp on December 31, 2024 and sell it today you would earn a total of  984.00  from holding Nordea Bank Abp or generate 12.36% 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.  Nordea Bank Abp

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nordea Bank Abp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Nordea Bank may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Embla Medical and Nordea Bank

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

The idea behind Embla Medical hf and Nordea Bank Abp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.