Correlation Between CD Projekt and Embracer Group

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

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

Diversification Opportunities for CD Projekt and Embracer Group

0.22

Correlation Coefficient

CD Projekt  Embracer Group

Modest diversification

The 3 months correlation between OTGLF and Embracer is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding CD Projekt SA 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 CD Projekt 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 CD Projekt SA 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 CD Projekt i.e., CD Projekt and Embracer Group go up and down completely randomly.

Pair Corralation between CD Projekt and Embracer Group

Assuming the 90 days horizon CD Projekt is expected to generate 2.31 times less return on investment than Embracer Group. In addition to that, CD Projekt is 1.78 times more volatile than Embracer Group AB. It trades about 0.02 of its total potential returns per unit of risk. Embracer Group AB is currently generating about 0.09 per unit of volatility. If you would invest  240.00  in Embracer Group AB on September 12, 2024 and sell it today you would earn a total of  32.00  from holding Embracer Group AB or generate 13.33% return on investment over 90 days.

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

CD Projekt SA  vs.  Embracer Group AB

CD Projekt SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CD Projekt SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, CD Projekt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Embracer Group AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Embracer Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CD Projekt and Embracer Group

The main advantage of trading using opposite CD Projekt and Embracer Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CD Projekt 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 CD Projekt SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.