Correlation Between E M and Browns Beach

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

By analyzing existing cross correlation between E M L and Browns Beach Hotels, you can compare the effects of market volatilities on E M and Browns Beach 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 E M with a short position of Browns Beach. Check out your portfolio center. Please also check ongoing floating volatility patterns of E M and Browns Beach.

Diversification Opportunities for E M and Browns Beach

0.59

Correlation Coefficient

E M  Browns Beach

Very weak diversification

The 3 months correlation between EMLN0000 and Browns is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding E M L and Browns Beach Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Browns Beach Hotels and E M 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 E M L are associated (or correlated) with Browns Beach. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Browns Beach Hotels has no effect on the direction of E M i.e., E M and Browns Beach go up and down completely randomly.

Pair Corralation between E M and Browns Beach

Assuming the 90 days trading horizon E M L is expected to under-perform the Browns Beach. But the stock apears to be less risky and, when comparing its historical volatility, E M L is 1.56 times less risky than Browns Beach. The stock trades about -0.06 of its potential returns per unit of risk. The Browns Beach Hotels is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,920  in Browns Beach Hotels on December 28, 2024 and sell it today you would lose (190.00) from holding Browns Beach Hotels or give up 9.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.49%
Values	Daily Returns

E M L  vs.  Browns Beach Hotels

E M L

Risk-Adjusted Performance

Very Weak

Over the last 90 days E M L has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Browns Beach Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Browns Beach Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Browns Beach is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with E M and Browns Beach

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

The idea behind E M L and Browns Beach Hotels 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.