Correlation Between Embla Medical and Scandinavian Investment

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

Diversification Opportunities for Embla Medical and Scandinavian Investment

0.15

Correlation Coefficient

Embla Medical  Scandinavian Investment

Average diversification

The 3 months correlation between Embla and Scandinavian is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Embla Medical hf and Scandinavian Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Investment 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 Scandinavian Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Investment has no effect on the direction of Embla Medical i.e., Embla Medical and Scandinavian Investment go up and down completely randomly.

Pair Corralation between Embla Medical and Scandinavian Investment

Assuming the 90 days trading horizon Embla Medical hf is expected to generate 0.88 times more return on investment than Scandinavian Investment. However, Embla Medical hf is 1.13 times less risky than Scandinavian Investment. It trades about 0.09 of its potential returns per unit of risk. Scandinavian Investment Group is currently generating about -0.02 per unit of risk. If you would invest  3,330  in Embla Medical hf on October 11, 2024 and sell it today you would earn a total of  260.00  from holding Embla Medical hf or generate 7.81% return on investment over 90 days.

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

Embla Medical hf  vs.  Scandinavian Investment Group

Embla Medical hf

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Embla Medical hf are ranked lower than 6 (%) 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.

Scandinavian Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scandinavian Investment Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Scandinavian Investment is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Embla Medical and Scandinavian Investment

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

The idea behind Embla Medical hf and Scandinavian Investment Group 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.