Correlation Between EMedia Holdings and Allied Electronics

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

By analyzing existing cross correlation between eMedia Holdings Limited and Allied Electronics, you can compare the effects of market volatilities on EMedia Holdings and Allied Electronics 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 EMedia Holdings with a short position of Allied Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMedia Holdings and Allied Electronics.

Diversification Opportunities for EMedia Holdings and Allied Electronics

0.53

Correlation Coefficient

EMedia Holdings  Allied Electronics

Very weak diversification

The 3 months correlation between EMedia and Allied is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding eMedia Holdings Limited and Allied Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Electronics and EMedia Holdings 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 eMedia Holdings Limited are associated (or correlated) with Allied Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Electronics has no effect on the direction of EMedia Holdings i.e., EMedia Holdings and Allied Electronics go up and down completely randomly.

Pair Corralation between EMedia Holdings and Allied Electronics

Assuming the 90 days trading horizon eMedia Holdings Limited is expected to generate 25.86 times more return on investment than Allied Electronics. However, EMedia Holdings is 25.86 times more volatile than Allied Electronics. It trades about 0.06 of its potential returns per unit of risk. Allied Electronics is currently generating about 0.09 per unit of risk. If you would invest  37,365  in eMedia Holdings Limited on October 10, 2024 and sell it today you would lose (1,465) from holding eMedia Holdings Limited or give up 3.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

eMedia Holdings Limited  vs.  Allied Electronics

eMedia Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eMedia Holdings Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, EMedia Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Allied Electronics

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Electronics are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Allied Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMedia Holdings and Allied Electronics

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

The idea behind eMedia Holdings Limited and Allied Electronics 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.