Correlation Between Embracer Group and Powercell Sweden

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

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

Diversification Opportunities for Embracer Group and Powercell Sweden

-0.04

Correlation Coefficient

Embracer Group  Powercell Sweden

Good diversification

The 3 months correlation between Embracer and Powercell is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Embracer Group AB and Powercell Sweden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powercell Sweden and Embracer 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 Embracer Group AB are associated (or correlated) with Powercell Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powercell Sweden has no effect on the direction of Embracer Group i.e., Embracer Group and Powercell Sweden go up and down completely randomly.

Pair Corralation between Embracer Group and Powercell Sweden

Assuming the 90 days trading horizon Embracer Group AB is expected to under-perform the Powercell Sweden. But the stock apears to be less risky and, when comparing its historical volatility, Embracer Group AB is 1.87 times less risky than Powercell Sweden. The stock trades about -0.31 of its potential returns per unit of risk. The Powercell Sweden is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,080  in Powercell Sweden on March 16, 2024 and sell it today you would earn a total of  342.00  from holding Powercell Sweden or generate 11.1% return on investment over 90 days.

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

Embracer Group AB  vs.  Powercell Sweden

Embracer Group AB

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embracer Group AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Embracer Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Powercell Sweden

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Powercell Sweden are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Powercell Sweden unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embracer Group and Powercell Sweden

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

The idea behind Embracer Group AB and Powercell Sweden 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.