Correlation Between Escalade Incorporated and Emerson Radio

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

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

Diversification Opportunities for Escalade Incorporated and Emerson Radio

-0.74

Correlation Coefficient

Escalade Incorporated  Emerson Radio

Pay attention - limited upside

The 3 months correlation between Escalade and Emerson is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and Escalade Incorporated 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 Escalade Incorporated are associated (or correlated) with Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of Escalade Incorporated i.e., Escalade Incorporated and Emerson Radio go up and down completely randomly.

Pair Corralation between Escalade Incorporated and Emerson Radio

Given the investment horizon of 90 days Escalade Incorporated is expected to generate 1.03 times more return on investment than Emerson Radio. However, Escalade Incorporated is 1.03 times more volatile than Emerson Radio. It trades about -0.05 of its potential returns per unit of risk. Emerson Radio is currently generating about -0.1 per unit of risk. If you would invest  1,515  in Escalade Incorporated on September 22, 2024 and sell it today you would lose (60.00) from holding Escalade Incorporated or give up 3.96% of portfolio value over 90 days.

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

Escalade Incorporated  vs.  Emerson Radio

Escalade Incorporated

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Escalade Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Escalade Incorporated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Emerson Radio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerson Radio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Emerson Radio is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Escalade Incorporated and Emerson Radio

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

The idea behind Escalade Incorporated and Emerson Radio 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 Global Correlations module to find global opportunities by holding instruments from different markets.