Correlation Between Embecta Corp and Teleflex Incorporated

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

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

Diversification Opportunities for Embecta Corp and Teleflex Incorporated

0.87

Correlation Coefficient

Embecta Corp  Teleflex Incorporated

Very poor diversification

The 3 months correlation between Embecta and Teleflex is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and Teleflex Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teleflex Incorporated and Embecta Corp 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 Embecta Corp are associated (or correlated) with Teleflex Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teleflex Incorporated has no effect on the direction of Embecta Corp i.e., Embecta Corp and Teleflex Incorporated go up and down completely randomly.

Pair Corralation between Embecta Corp and Teleflex Incorporated

Given the investment horizon of 90 days Embecta Corp is expected to under-perform the Teleflex Incorporated. In addition to that, Embecta Corp is 1.4 times more volatile than Teleflex Incorporated. It trades about -0.25 of its total potential returns per unit of risk. Teleflex Incorporated is currently generating about -0.12 per unit of volatility. If you would invest  22,451  in Teleflex Incorporated on February 5, 2024 and sell it today you would lose (2,150) from holding Teleflex Incorporated or give up 9.58% of portfolio value over 90 days.

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

Embecta Corp  vs.  Teleflex Incorporated

Embecta Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embecta Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Teleflex Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teleflex Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Embecta Corp and Teleflex Incorporated

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

The idea behind Embecta Corp and Teleflex Incorporated 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.