Correlation Between Eolus Vind and Embracer Group

Can any of the company-specific risk be diversified away by investing in both Eolus Vind and Embracer 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 Eolus Vind and Embracer Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eolus Vind AB and Embracer Group AB, you can compare the effects of market volatilities on Eolus Vind and Embracer 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 Eolus Vind with a short position of Embracer Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eolus Vind and Embracer Group.

Diversification Opportunities for Eolus Vind and Embracer Group

-0.47

Correlation Coefficient

Eolus Vind  Embracer Group

Very good diversification

The 3 months correlation between Eolus and Embracer is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Eolus Vind AB and Embracer Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embracer Group AB and Eolus Vind 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 Eolus Vind AB are associated (or correlated) with Embracer Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embracer Group AB has no effect on the direction of Eolus Vind i.e., Eolus Vind and Embracer Group go up and down completely randomly.

Pair Corralation between Eolus Vind and Embracer Group

Assuming the 90 days trading horizon Eolus Vind AB is expected to under-perform the Embracer Group. But the stock apears to be less risky and, when comparing its historical volatility, Eolus Vind AB is 1.22 times less risky than Embracer Group. The stock trades about -0.08 of its potential returns per unit of risk. The Embracer Group AB is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,357  in Embracer Group AB on August 31, 2024 and sell it today you would earn a total of  538.00  from holding Embracer Group AB or generate 22.83% return on investment over 90 days.

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

Eolus Vind AB  vs.  Embracer Group AB

Eolus Vind AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eolus Vind AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Embracer Group AB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 9 (%) 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.

Pair Trading with Eolus Vind and Embracer Group

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

The idea behind Eolus Vind AB and Embracer 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.