Correlation Between Nitro Games and Embracer Group

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

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

Diversification Opportunities for Nitro Games and Embracer Group

0.04

Correlation Coefficient

Nitro Games  Embracer Group

Significant diversification

The 3 months correlation between Nitro and Embracer is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nitro Games Oyj 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 Nitro Games 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 Nitro Games Oyj 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 Nitro Games i.e., Nitro Games and Embracer Group go up and down completely randomly.

Pair Corralation between Nitro Games and Embracer Group

Assuming the 90 days trading horizon Nitro Games Oyj is expected to under-perform the Embracer Group. In addition to that, Nitro Games is 1.69 times more volatile than Embracer Group AB. It trades about -0.01 of its total potential returns per unit of risk. Embracer Group AB is currently generating about 0.16 per unit of volatility. If you would invest  2,372  in Embracer Group AB on September 12, 2024 and sell it today you would earn a total of  732.00  from holding Embracer Group AB or generate 30.86% return on investment over 90 days.

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

Nitro Games Oyj  vs.  Embracer Group AB

Nitro Games Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nitro Games Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nitro Games is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Embracer Group AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 12 (%) 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 Nitro Games and Embracer Group

The main advantage of trading using opposite Nitro Games and Embracer Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nitro Games 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 Nitro Games Oyj 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.