Correlation Between Beijer Ref and Embracer Group

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

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

Diversification Opportunities for Beijer Ref and Embracer Group

-0.4

Correlation Coefficient

Beijer Ref  Embracer Group

Very good diversification

The 3 months correlation between Beijer and Embracer is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Beijer Ref AB 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 Beijer Ref 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 Beijer Ref AB 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 Beijer Ref i.e., Beijer Ref and Embracer Group go up and down completely randomly.

Pair Corralation between Beijer Ref and Embracer Group

Assuming the 90 days trading horizon Beijer Ref is expected to generate 18.84 times less return on investment than Embracer Group. But when comparing it to its historical volatility, Beijer Ref AB is 1.36 times less risky than Embracer Group. It trades about 0.01 of its potential returns per unit of risk. Embracer Group AB is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,357  in Embracer Group AB on September 2, 2024 and sell it today you would earn a total of  520.00  from holding Embracer Group AB or generate 22.06% return on investment over 90 days.

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

Beijer Ref AB  vs.  Embracer Group AB

Beijer Ref AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Beijer Ref and Embracer Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijer Ref 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 Beijer Ref AB 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.