Correlation Between Emkay Global and Allied Blenders

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

By analyzing existing cross correlation between Emkay Global Financial and Allied Blenders Distillers, you can compare the effects of market volatilities on Emkay Global and Allied Blenders 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 Emkay Global with a short position of Allied Blenders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emkay Global and Allied Blenders.

Diversification Opportunities for Emkay Global and Allied Blenders

0.27

Correlation Coefficient

Emkay Global  Allied Blenders

Modest diversification

The 3 months correlation between Emkay and Allied is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Emkay Global Financial and Allied Blenders Distillers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Blenders Dist and Emkay Global 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 Emkay Global Financial are associated (or correlated) with Allied Blenders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Blenders Dist has no effect on the direction of Emkay Global i.e., Emkay Global and Allied Blenders go up and down completely randomly.

Pair Corralation between Emkay Global and Allied Blenders

Assuming the 90 days trading horizon Emkay Global Financial is expected to under-perform the Allied Blenders. But the stock apears to be less risky and, when comparing its historical volatility, Emkay Global Financial is 1.02 times less risky than Allied Blenders. The stock trades about -0.39 of its potential returns per unit of risk. The Allied Blenders Distillers is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  41,745  in Allied Blenders Distillers on October 25, 2024 and sell it today you would lose (2,445) from holding Allied Blenders Distillers or give up 5.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Emkay Global Financial  vs.  Allied Blenders Distillers

Emkay Global Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emkay Global Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward-looking signals, Emkay Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Allied Blenders Dist

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Blenders Distillers are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Allied Blenders unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emkay Global and Allied Blenders

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

The idea behind Emkay Global Financial and Allied Blenders Distillers 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.