Correlation Between Embracer Group and Eolus Vind

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

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

Diversification Opportunities for Embracer Group and Eolus Vind

-0.41

Correlation Coefficient

Embracer Group  Eolus Vind

Very good diversification

The 3 months correlation between Embracer and Eolus is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Embracer Group AB and Eolus Vind AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eolus Vind AB and Embracer Group 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 Embracer Group AB are associated (or correlated) with Eolus Vind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eolus Vind AB has no effect on the direction of Embracer Group i.e., Embracer Group and Eolus Vind go up and down completely randomly.

Pair Corralation between Embracer Group and Eolus Vind

Assuming the 90 days trading horizon Embracer Group AB is expected to generate 1.2 times more return on investment than Eolus Vind. However, Embracer Group is 1.2 times more volatile than Eolus Vind AB. It trades about 0.1 of its potential returns per unit of risk. Eolus Vind AB is currently generating about -0.03 per unit of risk. If you would invest  2,419  in Embracer Group AB on September 4, 2024 and sell it today you would earn a total of  415.00  from holding Embracer Group AB or generate 17.16% return on investment over 90 days.

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

Embracer Group AB  vs.  Eolus Vind AB

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 somewhat uncertain basic indicators, Embracer Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Eolus Vind AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Embracer Group and Eolus Vind

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

The idea behind Embracer Group AB and Eolus Vind 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.