Correlation Between EMCORE and Network 1

Can any of the company-specific risk be diversified away by investing in both EMCORE and Network 1 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 EMCORE and Network 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EMCORE and Network 1 Technologies, you can compare the effects of market volatilities on EMCORE and Network 1 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 EMCORE with a short position of Network 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCORE and Network 1.

Diversification Opportunities for EMCORE and Network 1

-0.46

Correlation Coefficient

EMCORE  Network 1

Very good diversification

The 3 months correlation between EMCORE and Network is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE and Network 1 Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network 1 Technologies and EMCORE 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 EMCORE are associated (or correlated) with Network 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network 1 Technologies has no effect on the direction of EMCORE i.e., EMCORE and Network 1 go up and down completely randomly.

Pair Corralation between EMCORE and Network 1

Given the investment horizon of 90 days EMCORE is expected to generate 3.02 times more return on investment than Network 1. However, EMCORE is 3.02 times more volatile than Network 1 Technologies. It trades about 0.01 of its potential returns per unit of risk. Network 1 Technologies is currently generating about -0.02 per unit of risk. If you would invest  918.00  in EMCORE on September 26, 2024 and sell it today you would lose (613.00) from holding EMCORE or give up 66.78% of portfolio value over 90 days.

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

EMCORE  vs.  Network 1 Technologies

EMCORE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMCORE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward-looking signals, EMCORE reported solid returns over the last few months and may actually be approaching a breakup point.

Network 1 Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network 1 Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with EMCORE and Network 1

The main advantage of trading using opposite EMCORE and Network 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCORE position performs unexpectedly, Network 1 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 Network 1 will offset losses from the drop in Network 1's long position.

The idea behind EMCORE and Network 1 Technologies 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.