Correlation Between EI Du and Emerson Radio

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

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

Diversification Opportunities for EI Du and Emerson Radio

0.46

Correlation Coefficient

EI Du  Emerson Radio

Very weak diversification

The 3 months correlation between CTA-P-A and Emerson is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding EI du Pont and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and EI Du 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 EI du Pont 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 EI Du i.e., EI Du and Emerson Radio go up and down completely randomly.

Pair Corralation between EI Du and Emerson Radio

Assuming the 90 days trading horizon EI du Pont is expected to under-perform the Emerson Radio. But the preferred stock apears to be less risky and, when comparing its historical volatility, EI du Pont is 6.45 times less risky than Emerson Radio. The preferred stock trades about -0.11 of its potential returns per unit of risk. The Emerson Radio is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Emerson Radio on October 24, 2024 and sell it today you would earn a total of  9.00  from holding Emerson Radio or generate 21.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	77.78%
Values	Daily Returns

EI du Pont  vs.  Emerson Radio

EI du Pont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EI du Pont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Emerson Radio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Radio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Emerson Radio is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with EI Du and Emerson Radio

The main advantage of trading using opposite EI Du and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EI Du 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 EI du Pont 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.