Correlation Between Embla Medical and First Farms

Can any of the company-specific risk be diversified away by investing in both Embla Medical and First Farms 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 First Farms 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 First Farms AS, you can compare the effects of market volatilities on Embla Medical and First Farms 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 First Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embla Medical and First Farms.

Diversification Opportunities for Embla Medical and First Farms

0.83

Correlation Coefficient

Embla Medical  First Farms

Very poor diversification

The 3 months correlation between Embla and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Embla Medical hf and First Farms AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Farms AS 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 First Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Farms AS has no effect on the direction of Embla Medical i.e., Embla Medical and First Farms go up and down completely randomly.

Pair Corralation between Embla Medical and First Farms

Assuming the 90 days trading horizon Embla Medical hf is expected to generate 1.76 times more return on investment than First Farms. However, Embla Medical is 1.76 times more volatile than First Farms AS. It trades about 0.14 of its potential returns per unit of risk. First Farms AS is currently generating about 0.15 per unit of risk. If you would invest  2,563  in Embla Medical hf on April 17, 2025 and sell it today you would earn a total of  687.00  from holding Embla Medical hf or generate 26.8% return on investment over 90 days.

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

Embla Medical hf  vs.  First Farms AS

Embla Medical hf

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embla Medical hf are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Embla Medical exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Farms AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Farms AS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, First Farms sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embla Medical and First Farms

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

The idea behind Embla Medical hf and First Farms AS 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.