Correlation Between Embracer Group and Bravida Holding

Can any of the company-specific risk be diversified away by investing in both Embracer Group and Bravida Holding 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 Embracer Group and Bravida Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Embracer Group AB and Bravida Holding AB, you can compare the effects of market volatilities on Embracer Group and Bravida Holding 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 Embracer Group with a short position of Bravida Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embracer Group and Bravida Holding.

Diversification Opportunities for Embracer Group and Bravida Holding

-0.63

Correlation Coefficient

Embracer Group  Bravida Holding

Excellent diversification

The 3 months correlation between Embracer and Bravida is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Embracer Group AB and Bravida Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravida Holding AB and Embracer Group 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 Embracer Group AB are associated (or correlated) with Bravida Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravida Holding AB has no effect on the direction of Embracer Group i.e., Embracer Group and Bravida Holding go up and down completely randomly.

Pair Corralation between Embracer Group and Bravida Holding

Assuming the 90 days trading horizon Embracer Group AB is expected to under-perform the Bravida Holding. In addition to that, Embracer Group is 5.25 times more volatile than Bravida Holding AB. It trades about -0.05 of its total potential returns per unit of risk. Bravida Holding AB is currently generating about 0.22 per unit of volatility. If you would invest  7,900  in Bravida Holding AB on December 1, 2024 and sell it today you would earn a total of  1,315  from holding Bravida Holding AB or generate 16.65% return on investment over 90 days.

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

Embracer Group AB  vs.  Bravida Holding AB

Embracer Group AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Embracer Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bravida Holding AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bravida Holding AB are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bravida Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embracer Group and Bravida Holding

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

The idea behind Embracer Group AB and Bravida Holding AB 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.