Correlation Between Investor and Embracer Group

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

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

Diversification Opportunities for Investor and Embracer Group

0.07

Correlation Coefficient

Investor  Embracer Group

Significant diversification

The 3 months correlation between Investor and Embracer is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser 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 Investor 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 Investor AB ser 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 Investor i.e., Investor and Embracer Group go up and down completely randomly.

Pair Corralation between Investor and Embracer Group

Assuming the 90 days trading horizon Investor is expected to generate 15.17 times less return on investment than Embracer Group. But when comparing it to its historical volatility, Investor AB ser is 3.52 times less risky than Embracer Group. It trades about 0.04 of its potential returns per unit of risk. Embracer Group AB is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,372  in Embracer Group AB on September 12, 2024 and sell it today you would earn a total of  732.00  from holding Embracer Group AB or generate 30.86% return on investment over 90 days.

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

Investor AB ser  vs.  Embracer Group AB

Investor AB ser

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Investor AB ser are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Investor is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Embracer Group AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 12 (%) 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 Investor and Embracer Group

The main advantage of trading using opposite Investor and Embracer Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investor 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 Investor AB ser 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.