Correlation Between Embracer Group and Lindab International

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

Diversification Opportunities for Embracer Group and Lindab International

0.07

Correlation Coefficient

Embracer Group  Lindab International

Significant diversification

The 3 months correlation between Embracer and Lindab is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Embracer Group AB and Lindab International AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindab International 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 Lindab International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindab International has no effect on the direction of Embracer Group i.e., Embracer Group and Lindab International go up and down completely randomly.

Pair Corralation between Embracer Group and Lindab International

Assuming the 90 days trading horizon Embracer Group AB is expected to under-perform the Lindab International. In addition to that, Embracer Group is 2.77 times more volatile than Lindab International AB. It trades about -0.05 of its total potential returns per unit of risk. Lindab International AB is currently generating about -0.05 per unit of volatility. If you would invest  22,760  in Lindab International AB on November 29, 2024 and sell it today you would lose (1,840) from holding Lindab International AB or give up 8.08% of portfolio value over 90 days.

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

Embracer Group AB  vs.  Lindab International 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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lindab International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lindab International AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Embracer Group and Lindab International

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

The idea behind Embracer Group AB and Lindab International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.