Correlation Between Nexgel and Embecta Corp

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

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

Diversification Opportunities for Nexgel and Embecta Corp

0.06

Correlation Coefficient

Nexgel  Embecta Corp

Significant diversification

The 3 months correlation between Nexgel and Embecta is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Nexgel Inc and Embecta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embecta Corp and Nexgel 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 Nexgel Inc are associated (or correlated) with Embecta Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embecta Corp has no effect on the direction of Nexgel i.e., Nexgel and Embecta Corp go up and down completely randomly.

Pair Corralation between Nexgel and Embecta Corp

Given the investment horizon of 90 days Nexgel Inc is expected to generate 1.03 times more return on investment than Embecta Corp. However, Nexgel is 1.03 times more volatile than Embecta Corp. It trades about -0.18 of its potential returns per unit of risk. Embecta Corp is currently generating about -0.38 per unit of risk. If you would invest  238.00  in Nexgel Inc on February 2, 2024 and sell it today you would lose (26.00) from holding Nexgel Inc or give up 10.92% of portfolio value over 90 days.

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

Nexgel Inc  vs.  Embecta Corp

Nexgel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexgel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Nexgel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 unsteady 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.

Pair Trading with Nexgel and Embecta Corp

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

The idea behind Nexgel Inc and Embecta Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.