Correlation Between Embark Small and Embark Commodity

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

By analyzing existing cross correlation between Embark Small Cap and Embark Commodity Strategy, you can compare the effects of market volatilities on Embark Small and Embark Commodity 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 Embark Small with a short position of Embark Commodity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embark Small and Embark Commodity.

Diversification Opportunities for Embark Small and Embark Commodity

0.47

Correlation Coefficient

Embark Small  Embark Commodity

Very weak diversification

The 3 months correlation between Embark and Embark is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Embark Small Cap and Embark Commodity Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embark Commodity Strategy and Embark Small 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 Embark Small Cap are associated (or correlated) with Embark Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embark Commodity Strategy has no effect on the direction of Embark Small i.e., Embark Small and Embark Commodity go up and down completely randomly.

Pair Corralation between Embark Small and Embark Commodity

Assuming the 90 days horizon Embark Small Cap is expected to generate 1.45 times more return on investment than Embark Commodity. However, Embark Small is 1.45 times more volatile than Embark Commodity Strategy. It trades about 0.08 of its potential returns per unit of risk. Embark Commodity Strategy is currently generating about 0.03 per unit of risk. If you would invest  1,032  in Embark Small Cap on May 12, 2025 and sell it today you would earn a total of  53.00  from holding Embark Small Cap or generate 5.14% return on investment over 90 days.

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

Embark Small Cap  vs.  Embark Commodity Strategy

Embark Small Cap

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Embark Small Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Embark Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Embark Commodity Strategy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Embark Commodity Strategy are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Embark Commodity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Embark Small and Embark Commodity

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

The idea behind Embark Small Cap and Embark Commodity Strategy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.