Correlation Between Strategic Investments and Embla Medical

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

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

Diversification Opportunities for Strategic Investments and Embla Medical

-0.54

Correlation Coefficient

Strategic Investments  Embla Medical

Excellent diversification

The 3 months correlation between Strategic and Embla is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments 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 Strategic Investments 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 Strategic Investments 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 Strategic Investments i.e., Strategic Investments and Embla Medical go up and down completely randomly.

Pair Corralation between Strategic Investments and Embla Medical

Assuming the 90 days trading horizon Strategic Investments AS is expected to under-perform the Embla Medical. In addition to that, Strategic Investments is 2.15 times more volatile than Embla Medical hf. It trades about -0.02 of its total potential returns per unit of risk. Embla Medical hf is currently generating about 0.01 per unit of volatility. If you would invest  3,500  in Embla Medical hf on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Embla Medical hf or generate 0.0% return on investment over 90 days.

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

Strategic Investments AS  vs.  Embla Medical hf

Strategic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Investments AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Strategic Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Embla Medical hf

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental indicators, Embla Medical is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Strategic Investments and Embla Medical

The main advantage of trading using opposite Strategic Investments and Embla Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Investments 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 Strategic Investments 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.