Correlation Between Ampleforth and Embecta Corp

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

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

Diversification Opportunities for Ampleforth and Embecta Corp

-0.11

Correlation Coefficient

Ampleforth  Embecta Corp

Good diversification

The 3 months correlation between Ampleforth and Embecta is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ampleforth and Embecta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embecta Corp and Ampleforth 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 Ampleforth are associated (or correlated) with Embecta Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embecta Corp has no effect on the direction of Ampleforth i.e., Ampleforth and Embecta Corp go up and down completely randomly.

Pair Corralation between Ampleforth and Embecta Corp

Assuming the 90 days trading horizon Ampleforth is expected to generate 1.17 times more return on investment than Embecta Corp. However, Ampleforth is 1.17 times more volatile than Embecta Corp. It trades about 0.1 of its potential returns per unit of risk. Embecta Corp is currently generating about 0.1 per unit of risk. If you would invest  100.00  in Ampleforth on September 3, 2024 and sell it today you would earn a total of  31.00  from holding Ampleforth or generate 31.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ampleforth  vs.  Embecta Corp

Ampleforth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ampleforth are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ampleforth exhibited solid returns over the last few months and may actually be approaching a breakup point.

Embecta Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embecta Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Embecta Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ampleforth and Embecta Corp

The main advantage of trading using opposite Ampleforth and Embecta Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ampleforth position performs unexpectedly, Embecta Corp 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 Embecta Corp will offset losses from the drop in Embecta Corp's long position.

The idea behind Ampleforth and Embecta Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.