Correlation Between Peloton Minerals and Embecta Corp

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

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

Diversification Opportunities for Peloton Minerals and Embecta Corp

-0.22

Correlation Coefficient

Peloton Minerals  Embecta Corp

Very good diversification

The 3 months correlation between Peloton and Embecta is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Peloton Minerals and Embecta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embecta Corp and Peloton Minerals 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 Peloton Minerals are associated (or correlated) with Embecta Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embecta Corp has no effect on the direction of Peloton Minerals i.e., Peloton Minerals and Embecta Corp go up and down completely randomly.

Pair Corralation between Peloton Minerals and Embecta Corp

Assuming the 90 days horizon Peloton Minerals is expected to generate 1.66 times less return on investment than Embecta Corp. In addition to that, Peloton Minerals is 2.07 times more volatile than Embecta Corp. It trades about 0.01 of its total potential returns per unit of risk. Embecta Corp is currently generating about 0.04 per unit of volatility. If you would invest  1,506  in Embecta Corp on September 10, 2024 and sell it today you would earn a total of  454.00  from holding Embecta Corp or generate 30.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.66%
Values	Daily Returns

Peloton Minerals  vs.  Embecta Corp

Peloton Minerals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Peloton Minerals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Peloton Minerals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Embecta Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embecta Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, Embecta Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Peloton Minerals and Embecta Corp

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

The idea behind Peloton Minerals and Embecta Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.