Correlation Between Embracer Group and Humble Group

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

Diversification Opportunities for Embracer Group and Humble Group

0.15

Correlation Coefficient

Embracer Group  Humble Group

Average diversification

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

Pair Corralation between Embracer Group and Humble Group

Assuming the 90 days trading horizon Embracer Group AB is expected to generate 1.08 times more return on investment than Humble Group. However, Embracer Group is 1.08 times more volatile than Humble Group AB. It trades about 0.09 of its potential returns per unit of risk. Humble Group AB is currently generating about 0.0 per unit of risk. If you would invest  2,612  in Embracer Group AB on October 1, 2024 and sell it today you would earn a total of  415.00  from holding Embracer Group AB or generate 15.89% return on investment over 90 days.

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

Embracer Group AB  vs.  Humble Group AB

Embracer Group AB

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Embracer Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Humble Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humble Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Humble Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Embracer Group and Humble Group

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

The idea behind Embracer Group AB and Humble Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.