Correlation Between Emkay Global and Embassy Office

Can any of the company-specific risk be diversified away by investing in both Emkay Global and Embassy Office 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 Emkay Global and Embassy Office into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emkay Global Financial and Embassy Office Parks, you can compare the effects of market volatilities on Emkay Global and Embassy Office 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 Emkay Global with a short position of Embassy Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emkay Global and Embassy Office.

Diversification Opportunities for Emkay Global and Embassy Office

0.63

Correlation Coefficient

Emkay Global  Embassy Office

Poor diversification

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

Pair Corralation between Emkay Global and Embassy Office

Assuming the 90 days trading horizon Emkay Global Financial is expected to under-perform the Embassy Office. In addition to that, Emkay Global is 2.9 times more volatile than Embassy Office Parks. It trades about -0.17 of its total potential returns per unit of risk. Embassy Office Parks is currently generating about -0.03 per unit of volatility. If you would invest  37,295  in Embassy Office Parks on December 26, 2024 and sell it today you would lose (870.00) from holding Embassy Office Parks or give up 2.33% of portfolio value over 90 days.

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

Emkay Global Financial  vs.  Embassy Office Parks

Emkay Global Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Emkay Global Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Embassy Office Parks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Embassy Office is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Emkay Global and Embassy Office

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

The idea behind Emkay Global Financial and Embassy Office Parks 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.