Correlation Between Empire Global and Haier Smart

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

By analyzing existing cross correlation between Empire Global Gaming and Haier Smart Home, you can compare the effects of market volatilities on Empire Global and Haier Smart 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 Empire Global with a short position of Haier Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Global and Haier Smart.

Diversification Opportunities for Empire Global and Haier Smart

-0.51

Correlation Coefficient

Empire Global  Haier Smart

Excellent diversification

The 3 months correlation between Empire and Haier is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Empire Global Gaming and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home and Empire 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 Empire Global Gaming are associated (or correlated) with Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Empire Global i.e., Empire Global and Haier Smart go up and down completely randomly.

Pair Corralation between Empire Global and Haier Smart

Given the investment horizon of 90 days Empire Global Gaming is expected to under-perform the Haier Smart. In addition to that, Empire Global is 1.25 times more volatile than Haier Smart Home. It trades about -0.17 of its total potential returns per unit of risk. Haier Smart Home is currently generating about 0.13 per unit of volatility. If you would invest  90.00  in Haier Smart Home on September 11, 2024 and sell it today you would earn a total of  85.00  from holding Haier Smart Home or generate 94.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Empire Global Gaming  vs.  Haier Smart Home

Empire Global Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Global Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Haier Smart Home

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Haier Smart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire Global and Haier Smart

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

The idea behind Empire Global Gaming and Haier Smart Home 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.