Correlation Between Zaptec AS and Embracer Group

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

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

Diversification Opportunities for Zaptec AS and Embracer Group

-0.43

Correlation Coefficient

Zaptec AS  Embracer Group

Very good diversification

The 3 months correlation between Zaptec and Embracer is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Zaptec AS 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 Zaptec AS 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 Zaptec AS 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 Zaptec AS i.e., Zaptec AS and Embracer Group go up and down completely randomly.

Pair Corralation between Zaptec AS and Embracer Group

Assuming the 90 days trading horizon Zaptec AS is expected to under-perform the Embracer Group. In addition to that, Zaptec AS is 1.22 times more volatile than Embracer Group AB. It trades about -0.09 of its total potential returns per unit of risk. Embracer Group AB is currently generating about 0.13 per unit of volatility. If you would invest  2,320  in Embracer Group AB on September 3, 2024 and sell it today you would earn a total of  557.00  from holding Embracer Group AB or generate 24.01% return on investment over 90 days.

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

Zaptec AS  vs.  Embracer Group AB

Zaptec AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zaptec AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Embracer Group AB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 9 (%) 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 Zaptec AS and Embracer Group

The main advantage of trading using opposite Zaptec AS and Embracer Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zaptec AS 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 Zaptec AS 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.