Correlation Between Kreditbanken and Embla Medical

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

By analyzing existing cross correlation between Kreditbanken AS and Embla Medical hf, you can compare the effects of market volatilities on Kreditbanken and Embla Medical 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 Kreditbanken with a short position of Embla Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kreditbanken and Embla Medical.

Diversification Opportunities for Kreditbanken and Embla Medical

0.02

Correlation Coefficient

Kreditbanken  Embla Medical

Significant diversification

The 3 months correlation between Kreditbanken and Embla is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Kreditbanken AS and Embla Medical hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embla Medical hf and Kreditbanken 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 Kreditbanken AS are associated (or correlated) with Embla Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embla Medical hf has no effect on the direction of Kreditbanken i.e., Kreditbanken and Embla Medical go up and down completely randomly.

Pair Corralation between Kreditbanken and Embla Medical

Assuming the 90 days trading horizon Kreditbanken AS is expected to generate 0.58 times more return on investment than Embla Medical. However, Kreditbanken AS is 1.74 times less risky than Embla Medical. It trades about 0.23 of its potential returns per unit of risk. Embla Medical hf is currently generating about -0.1 per unit of risk. If you would invest  505,000  in Kreditbanken AS on October 8, 2024 and sell it today you would earn a total of  15,000  from holding Kreditbanken AS or generate 2.97% return on investment over 90 days.

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

Kreditbanken AS  vs.  Embla Medical hf

Kreditbanken AS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kreditbanken AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Kreditbanken is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Embla Medical hf

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embla Medical hf are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Embla Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kreditbanken and Embla Medical

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

The idea behind Kreditbanken AS and Embla Medical hf 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.