Correlation Between North Media and Embla Medical

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

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

Diversification Opportunities for North Media and Embla Medical

0.87

Correlation Coefficient

North Media  Embla Medical

Very poor diversification

The 3 months correlation between North and Embla is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding North Media 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 North Media 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 North Media 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 North Media i.e., North Media and Embla Medical go up and down completely randomly.

Pair Corralation between North Media and Embla Medical

Assuming the 90 days trading horizon North Media AS is expected to under-perform the Embla Medical. In addition to that, North Media is 1.18 times more volatile than Embla Medical hf. It trades about -0.17 of its total potential returns per unit of risk. Embla Medical hf is currently generating about -0.15 per unit of volatility. If you would invest  3,490  in Embla Medical hf on December 24, 2024 and sell it today you would lose (600.00) from holding Embla Medical hf or give up 17.19% of portfolio value over 90 days.

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

North Media AS  vs.  Embla Medical hf

North Media AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days North Media AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Embla Medical hf

Risk-Adjusted Performance

Very Weak

Over the last 90 days Embla Medical hf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with North Media and Embla Medical

The main advantage of trading using opposite North Media and Embla Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North Media 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 North Media 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.