Correlation Between GM and Embla Medical
Can any of the company-specific risk be diversified away by investing in both GM and Embla Medical 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 GM and Embla Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Embla Medical hf, you can compare the effects of market volatilities on GM and Embla Medical 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 GM with a short position of Embla Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Embla Medical.
Diversification Opportunities for GM and Embla Medical
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Embla is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Embla Medical hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embla Medical hf and GM 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 General Motors are associated (or correlated) with Embla Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embla Medical hf has no effect on the direction of GM i.e., GM and Embla Medical go up and down completely randomly.
Pair Corralation between GM and Embla Medical
Allowing for the 90-day total investment horizon GM is expected to generate 1.12 times less return on investment than Embla Medical. In addition to that, GM is 1.29 times more volatile than Embla Medical hf. It trades about 0.08 of its total potential returns per unit of risk. Embla Medical hf is currently generating about 0.12 per unit of volatility. If you would invest 2,790 in Embla Medical hf on August 30, 2024 and sell it today you would earn a total of 770.00 from holding Embla Medical hf or generate 27.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
General Motors vs. Embla Medical hf
Performance |
| Timeline |
| General Motors |
| Embla Medical hf |
GM and Embla Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Embla Medical
The main advantage of trading using opposite GM and Embla Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Embla Medical 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 Embla Medical will offset losses from the drop in Embla Medical's long position.The idea behind General Motors and Embla Medical hf 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.| Embla Medical vs. Novo Nordisk AS | Embla Medical vs. Nordea Bank Abp | Embla Medical vs. DSV Panalpina AS | Embla Medical vs. AP Mller |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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