Correlation Between Vestjysk Bank and Embla Medical

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

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

Diversification Opportunities for Vestjysk Bank and Embla Medical

-0.59

Correlation Coefficient

Vestjysk Bank  Embla Medical

Excellent diversification

The 3 months correlation between Vestjysk and Embla is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vestjysk Bank 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 Vestjysk Bank 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 Vestjysk Bank 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 Vestjysk Bank i.e., Vestjysk Bank and Embla Medical go up and down completely randomly.

Pair Corralation between Vestjysk Bank and Embla Medical

Assuming the 90 days trading horizon Vestjysk Bank AS is expected to under-perform the Embla Medical. But the stock apears to be less risky and, when comparing its historical volatility, Vestjysk Bank AS is 1.68 times less risky than Embla Medical. The stock trades about -0.01 of its potential returns per unit of risk. The Embla Medical hf is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,100  in Embla Medical hf on September 26, 2024 and sell it today you would earn a total of  430.00  from holding Embla Medical hf or generate 13.87% return on investment over 90 days.

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

Vestjysk Bank AS  vs.  Embla Medical hf

Vestjysk Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestjysk Bank AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vestjysk Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Embla Medical hf

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embla Medical hf are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Embla Medical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vestjysk Bank and Embla Medical

The main advantage of trading using opposite Vestjysk Bank and Embla Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestjysk Bank 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 Vestjysk Bank 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.