Correlation Between Humble Group and Embellence Group

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Can any of the company-specific risk be diversified away by investing in both Humble Group and Embellence 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 Humble Group and Embellence Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Humble Group AB and Embellence Group AB, you can compare the effects of market volatilities on Humble Group and Embellence 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 Humble Group with a short position of Embellence Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humble Group and Embellence Group.

Diversification Opportunities for Humble Group and Embellence Group

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Humble and Embellence is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Humble Group AB and Embellence Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embellence Group and Humble 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 Humble Group AB are associated (or correlated) with Embellence Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embellence Group has no effect on the direction of Humble Group i.e., Humble Group and Embellence Group go up and down completely randomly.

Pair Corralation between Humble Group and Embellence Group

Assuming the 90 days trading horizon Humble Group is expected to generate 1.36 times less return on investment than Embellence Group. In addition to that, Humble Group is 1.34 times more volatile than Embellence Group AB. It trades about 0.03 of its total potential returns per unit of risk. Embellence Group AB is currently generating about 0.05 per unit of volatility. If you would invest  1,939  in Embellence Group AB on September 24, 2024 and sell it today you would earn a total of  1,121  from holding Embellence Group AB or generate 57.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Humble Group AB  vs.  Embellence Group AB

 Performance 
       Timeline  
Humble Group AB 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Humble Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Humble Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Embellence Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Embellence Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Humble Group and Embellence Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Humble Group and Embellence Group

The main advantage of trading using opposite Humble Group and Embellence Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Humble Group position performs unexpectedly, Embellence 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 Embellence Group will offset losses from the drop in Embellence Group's long position.
The idea behind Humble Group AB and Embellence 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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