Correlation Between Embracer Group and Tele2 AB

Can any of the company-specific risk be diversified away by investing in both Embracer Group and Tele2 AB 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 Tele2 AB 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 Tele2 AB, you can compare the effects of market volatilities on Embracer Group and Tele2 AB 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 Tele2 AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embracer Group and Tele2 AB.

Diversification Opportunities for Embracer Group and Tele2 AB

-0.41

Correlation Coefficient

Embracer Group  Tele2 AB

Very good diversification

The 3 months correlation between Embracer and Tele2 is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Embracer Group AB and Tele2 AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tele2 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 Tele2 AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tele2 AB has no effect on the direction of Embracer Group i.e., Embracer Group and Tele2 AB go up and down completely randomly.

Pair Corralation between Embracer Group and Tele2 AB

Assuming the 90 days trading horizon Embracer Group AB is expected to generate 2.78 times more return on investment than Tele2 AB. However, Embracer Group is 2.78 times more volatile than Tele2 AB. It trades about 0.11 of its potential returns per unit of risk. Tele2 AB is currently generating about 0.02 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  477.00  from holding Embracer Group AB or generate 19.72% 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.  Tele2 AB

Embracer Group AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 8 (%) 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.

Tele2 AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tele2 AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Tele2 AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Embracer Group and Tele2 AB

The main advantage of trading using opposite Embracer Group and Tele2 AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embracer Group position performs unexpectedly, Tele2 AB 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 Tele2 AB will offset losses from the drop in Tele2 AB's long position.

The idea behind Embracer Group AB and Tele2 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.