Correlation Between Playstudios and Embracer Group

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

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

Diversification Opportunities for Playstudios and Embracer Group

-0.27

Correlation Coefficient

Playstudios  Embracer Group

Very good diversification

The 3 months correlation between Playstudios and Embracer is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Playstudios 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 Playstudios 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 Playstudios 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 Playstudios i.e., Playstudios and Embracer Group go up and down completely randomly.

Pair Corralation between Playstudios and Embracer Group

Given the investment horizon of 90 days Playstudios is expected to generate 1.38 times more return on investment than Embracer Group. However, Playstudios is 1.38 times more volatile than Embracer Group AB. It trades about 0.16 of its potential returns per unit of risk. Embracer Group AB is currently generating about 0.09 per unit of risk. If you would invest  160.00  in Playstudios on September 12, 2024 and sell it today you would earn a total of  58.00  from holding Playstudios or generate 36.25% return on investment over 90 days.

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

Playstudios  vs.  Embracer Group AB

Playstudios

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playstudios are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Playstudios unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Playstudios and Embracer Group

The main advantage of trading using opposite Playstudios and Embracer Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playstudios 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 Playstudios 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 Global Correlations module to find global opportunities by holding instruments from different markets.