Correlation Between Emkay Global and Krebs Biochemicals

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

Diversification Opportunities for Emkay Global and Krebs Biochemicals

0.85

Correlation Coefficient

Emkay Global  Krebs Biochemicals

Very poor diversification

The 3 months correlation between Emkay and Krebs is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Emkay Global Financial and Krebs Biochemicals and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krebs Biochemicals and 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 Krebs Biochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krebs Biochemicals and has no effect on the direction of Emkay Global i.e., Emkay Global and Krebs Biochemicals go up and down completely randomly.

Pair Corralation between Emkay Global and Krebs Biochemicals

Assuming the 90 days trading horizon Emkay Global Financial is expected to generate 0.51 times more return on investment than Krebs Biochemicals. However, Emkay Global Financial is 1.94 times less risky than Krebs Biochemicals. It trades about -0.37 of its potential returns per unit of risk. Krebs Biochemicals and is currently generating about -0.24 per unit of risk. If you would invest  34,300  in Emkay Global Financial on October 12, 2024 and sell it today you would lose (3,800) from holding Emkay Global Financial or give up 11.08% of portfolio value over 90 days.

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

Emkay Global Financial  vs.  Krebs Biochemicals and

Emkay Global Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emkay Global Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward-looking signals, Emkay Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Krebs Biochemicals and

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Krebs Biochemicals and are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Krebs Biochemicals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emkay Global and Krebs Biochemicals

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

The idea behind Emkay Global Financial and Krebs Biochemicals and 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.