Correlation Between Embla Medical and Djurslands Bank

Can any of the company-specific risk be diversified away by investing in both Embla Medical and Djurslands Bank 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 Embla Medical and Djurslands Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Embla Medical hf and Djurslands Bank, you can compare the effects of market volatilities on Embla Medical and Djurslands Bank 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 Embla Medical with a short position of Djurslands Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embla Medical and Djurslands Bank.

Diversification Opportunities for Embla Medical and Djurslands Bank

0.7

Correlation Coefficient

Embla Medical  Djurslands Bank

Poor diversification

The 3 months correlation between Embla and Djurslands is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Embla Medical hf and Djurslands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Djurslands Bank and Embla Medical 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 Embla Medical hf are associated (or correlated) with Djurslands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Djurslands Bank has no effect on the direction of Embla Medical i.e., Embla Medical and Djurslands Bank go up and down completely randomly.

Pair Corralation between Embla Medical and Djurslands Bank

Assuming the 90 days trading horizon Embla Medical is expected to generate 3.3 times less return on investment than Djurslands Bank. In addition to that, Embla Medical is 1.66 times more volatile than Djurslands Bank. It trades about 0.02 of its total potential returns per unit of risk. Djurslands Bank is currently generating about 0.08 per unit of volatility. If you would invest  39,600  in Djurslands Bank on March 4, 2025 and sell it today you would earn a total of  25,400  from holding Djurslands Bank or generate 64.14% return on investment over 90 days.

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

Embla Medical hf  vs.  Djurslands Bank

Embla Medical hf

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Embla Medical hf are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Embla Medical may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Djurslands Bank

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Djurslands Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Djurslands Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Embla Medical and Djurslands Bank

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

The idea behind Embla Medical hf and Djurslands Bank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..