Correlation Between Emerson Radio and CTS

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

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

Diversification Opportunities for Emerson Radio and CTS

-0.6

Correlation Coefficient

Emerson Radio  CTS

Excellent diversification

The 3 months correlation between Emerson and CTS is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and CTS Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Corporation and Emerson Radio 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 Emerson Radio are associated (or correlated) with CTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Corporation has no effect on the direction of Emerson Radio i.e., Emerson Radio and CTS go up and down completely randomly.

Pair Corralation between Emerson Radio and CTS

Considering the 90-day investment horizon Emerson Radio is expected to generate 0.99 times more return on investment than CTS. However, Emerson Radio is 1.01 times less risky than CTS. It trades about 0.01 of its potential returns per unit of risk. CTS Corporation is currently generating about -0.14 per unit of risk. If you would invest  43.00  in Emerson Radio on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Emerson Radio or generate 0.0% return on investment over 90 days.

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

Emerson Radio  vs.  CTS Corp.

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

CTS Corporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CTS Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CTS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Emerson Radio and CTS

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

The idea behind Emerson Radio and CTS Corporation 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.