Correlation Between Gap, and Emerson Radio

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

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

Diversification Opportunities for Gap, and Emerson Radio

-0.81

Correlation Coefficient

Gap,  Emerson Radio

Pay attention - limited upside

The 3 months correlation between Gap, and Emerson is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and Gap, 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 The Gap, 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 Gap, i.e., Gap, and Emerson Radio go up and down completely randomly.

Pair Corralation between Gap, and Emerson Radio

Considering the 90-day investment horizon The Gap, is expected to generate 1.17 times more return on investment than Emerson Radio. However, Gap, is 1.17 times more volatile than Emerson Radio. It trades about 0.06 of its potential returns per unit of risk. Emerson Radio is currently generating about 0.0 per unit of risk. If you would invest  1,053  in The Gap, on September 24, 2024 and sell it today you would earn a total of  1,358  from holding The Gap, or generate 128.96% return on investment over 90 days.

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

The Gap,  vs.  Emerson Radio

Gap,

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gap, and Emerson Radio

The main advantage of trading using opposite Gap, and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.