Correlation Between ClearOne and Emerson Radio

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

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

Diversification Opportunities for ClearOne and Emerson Radio

0.26

Correlation Coefficient

ClearOne  Emerson Radio

Modest diversification

The 3 months correlation between ClearOne and Emerson is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding ClearOne and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and ClearOne 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 ClearOne are associated (or correlated) with Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of ClearOne i.e., ClearOne and Emerson Radio go up and down completely randomly.

Pair Corralation between ClearOne and Emerson Radio

Given the investment horizon of 90 days ClearOne is expected to generate 1.89 times more return on investment than Emerson Radio. However, ClearOne is 1.89 times more volatile than Emerson Radio. It trades about 0.11 of its potential returns per unit of risk. Emerson Radio is currently generating about -0.1 per unit of risk. If you would invest  60.00  in ClearOne on October 5, 2024 and sell it today you would earn a total of  18.00  from holding ClearOne or generate 30.0% return on investment over 90 days.

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

ClearOne  vs.  Emerson Radio

ClearOne

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ClearOne are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, ClearOne displayed solid returns over the last few months and may actually be approaching a breakup point.

Emerson Radio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerson Radio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ClearOne and Emerson Radio

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

The idea behind ClearOne and Emerson Radio 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.