Correlation Between Embracer Group and Mentice AB

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

Diversification Opportunities for Embracer Group and Mentice AB

-0.05

Correlation Coefficient

Embracer Group  Mentice AB

Good diversification

The 3 months correlation between Embracer and Mentice is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Embracer Group AB and Mentice AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mentice 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 Mentice AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mentice AB has no effect on the direction of Embracer Group i.e., Embracer Group and Mentice AB go up and down completely randomly.

Pair Corralation between Embracer Group and Mentice AB

Assuming the 90 days trading horizon Embracer Group is expected to generate 1.85 times less return on investment than Mentice AB. But when comparing it to its historical volatility, Embracer Group AB is 1.37 times less risky than Mentice AB. It trades about 0.11 of its potential returns per unit of risk. Mentice AB is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,280  in Mentice AB on September 24, 2024 and sell it today you would earn a total of  220.00  from holding Mentice AB or generate 9.65% return on investment over 90 days.

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

Embracer Group AB  vs.  Mentice AB

Embracer Group AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 8 (%) 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.

Mentice AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mentice 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 Mentice AB

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

The idea behind Embracer Group AB and Mentice 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.