Correlation Between Embecta Corp and Carl Zeiss

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

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

Diversification Opportunities for Embecta Corp and Carl Zeiss

-0.47

Correlation Coefficient

Embecta Corp  Carl Zeiss

Very good diversification

The 3 months correlation between Embecta and Carl is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and Carl Zeiss Meditec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carl Zeiss Meditec and Embecta Corp 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 Embecta Corp are associated (or correlated) with Carl Zeiss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carl Zeiss Meditec has no effect on the direction of Embecta Corp i.e., Embecta Corp and Carl Zeiss go up and down completely randomly.

Pair Corralation between Embecta Corp and Carl Zeiss

Given the investment horizon of 90 days Embecta Corp is expected to generate 5.81 times more return on investment than Carl Zeiss. However, Embecta Corp is 5.81 times more volatile than Carl Zeiss Meditec. It trades about 0.28 of its potential returns per unit of risk. Carl Zeiss Meditec is currently generating about -0.3 per unit of risk. If you would invest  1,408  in Embecta Corp on September 1, 2024 and sell it today you would earn a total of  675.00  from holding Embecta Corp or generate 47.94% return on investment over 90 days.

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

Embecta Corp  vs.  Carl Zeiss Meditec

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.

Carl Zeiss Meditec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carl Zeiss Meditec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Embecta Corp and Carl Zeiss

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

The idea behind Embecta Corp and Carl Zeiss Meditec 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.