Correlation Between Extended Market and Embecta Corp

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

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

Diversification Opportunities for Extended Market and Embecta Corp

-0.3

Correlation Coefficient

Extended Market  Embecta Corp

Very good diversification

The 3 months correlation between Extended and Embecta is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Embecta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embecta Corp and Extended Market 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 Extended Market Index 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 Extended Market i.e., Extended Market and Embecta Corp go up and down completely randomly.

Pair Corralation between Extended Market and Embecta Corp

Assuming the 90 days horizon Extended Market is expected to generate 1.38 times less return on investment than Embecta Corp. But when comparing it to its historical volatility, Extended Market Index is 4.8 times less risky than Embecta Corp. It trades about 0.08 of its potential returns per unit of risk. Embecta Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,224  in Embecta Corp on May 11, 2025 and sell it today you would earn a total of  4.00  from holding Embecta Corp or generate 0.33% return on investment over 90 days.

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

Extended Market Index  vs.  Embecta Corp

Extended Market Index

Risk-Adjusted Performance

Mild

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

Embecta Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Embecta Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Embecta Corp may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Extended Market and Embecta Corp

The main advantage of trading using opposite Extended Market and Embecta Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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 Extended Market Index 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..