Correlation Between Embla Medical and Spar Nord

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

Diversification Opportunities for Embla Medical and Spar Nord

-0.6

Correlation Coefficient

Embla Medical  Spar Nord

Excellent diversification

The 3 months correlation between Embla and Spar is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Embla Medical hf and Spar Nord Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spar Nord 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 Spar Nord. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spar Nord Bank has no effect on the direction of Embla Medical i.e., Embla Medical and Spar Nord go up and down completely randomly.

Pair Corralation between Embla Medical and Spar Nord

Assuming the 90 days trading horizon Embla Medical hf is expected to under-perform the Spar Nord. In addition to that, Embla Medical is 5.96 times more volatile than Spar Nord Bank. It trades about -0.2 of its total potential returns per unit of risk. Spar Nord Bank is currently generating about 0.06 per unit of volatility. If you would invest  20,600  in Spar Nord Bank on December 30, 2024 and sell it today you would earn a total of  250.00  from holding Spar Nord Bank or generate 1.21% 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.  Spar Nord 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.

Spar Nord Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spar Nord Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Spar Nord 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 Spar Nord

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

The idea behind Embla Medical hf and Spar Nord 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.