Correlation Between Doubledown Interactive and Embracer Group

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

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

Diversification Opportunities for Doubledown Interactive and Embracer Group

0.2

Correlation Coefficient

Doubledown Interactive  Embracer Group

Modest diversification

The 3 months correlation between Doubledown and Embracer is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Doubledown Interactive Co 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 Doubledown Interactive 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 Doubledown Interactive Co 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 Doubledown Interactive i.e., Doubledown Interactive and Embracer Group go up and down completely randomly.

Pair Corralation between Doubledown Interactive and Embracer Group

Considering the 90-day investment horizon Doubledown Interactive Co is expected to under-perform the Embracer Group. In addition to that, Doubledown Interactive is 1.36 times more volatile than Embracer Group AB. It trades about -0.03 of its total potential returns per unit of risk. Embracer Group AB is currently generating about 0.09 per unit of volatility. If you would invest  240.00  in Embracer Group AB on September 12, 2024 and sell it today you would earn a total of  32.00  from holding Embracer Group AB or generate 13.33% return on investment over 90 days.

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

Doubledown Interactive Co  vs.  Embracer Group AB

Doubledown Interactive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Doubledown Interactive Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Doubledown Interactive is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Embracer Group AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Embracer Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Doubledown Interactive and Embracer Group

The main advantage of trading using opposite Doubledown Interactive and Embracer Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Doubledown Interactive 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 Doubledown Interactive Co 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.