Correlation Between Empire Global and Silk Road

Can any of the company-specific risk be diversified away by investing in both Empire Global and Silk Road 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 Silk Road 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 Silk Road Medical, you can compare the effects of market volatilities on Empire Global and Silk Road 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 Silk Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Global and Silk Road.

Diversification Opportunities for Empire Global and Silk Road

-0.58

Correlation Coefficient

Empire Global  Silk Road

Excellent diversification

The 3 months correlation between Empire and Silk is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Empire Global Gaming and Silk Road Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silk Road Medical 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 Silk Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silk Road Medical has no effect on the direction of Empire Global i.e., Empire Global and Silk Road go up and down completely randomly.

Pair Corralation between Empire Global and Silk Road

Given the investment horizon of 90 days Empire Global Gaming is expected to generate 15.68 times more return on investment than Silk Road. However, Empire Global is 15.68 times more volatile than Silk Road Medical. It trades about 0.05 of its potential returns per unit of risk. Silk Road Medical is currently generating about 0.17 per unit of risk. If you would invest  0.03  in Empire Global Gaming on October 5, 2024 and sell it today you would lose (0.02) from holding Empire Global Gaming or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.81%
Values	Daily Returns

Empire Global Gaming  vs.  Silk Road Medical

Empire Global Gaming

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Global Gaming are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Empire Global reported solid returns over the last few months and may actually be approaching a breakup point.

Silk Road Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silk Road Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Silk Road is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Empire Global and Silk Road

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

The idea behind Empire Global Gaming and Silk Road Medical 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.