Correlation Between Emerson Radio and ECD Automotive

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Can any of the company-specific risk be diversified away by investing in both Emerson Radio and ECD Automotive 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 ECD Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Radio and ECD Automotive Design, you can compare the effects of market volatilities on Emerson Radio and ECD Automotive 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 ECD Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and ECD Automotive.

Diversification Opportunities for Emerson Radio and ECD Automotive

EmersonECDDiversified AwayEmersonECDDiversified Away100%
-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Emerson and ECD is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and ECD Automotive Design in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECD Automotive Design 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 ECD Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECD Automotive Design has no effect on the direction of Emerson Radio i.e., Emerson Radio and ECD Automotive go up and down completely randomly.

Pair Corralation between Emerson Radio and ECD Automotive

Considering the 90-day investment horizon Emerson Radio is expected to generate 0.75 times more return on investment than ECD Automotive. However, Emerson Radio is 1.34 times less risky than ECD Automotive. It trades about 0.0 of its potential returns per unit of risk. ECD Automotive Design is currently generating about -0.03 per unit of risk. If you would invest  49.00  in Emerson Radio on November 27, 2024 and sell it today you would lose (0.99) from holding Emerson Radio or give up 2.02% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Emerson Radio  vs.  ECD Automotive Design

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50510
JavaScript chart by amCharts 3.21.15MSN ECDA
       Timeline  
Emerson Radio 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Radio are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Emerson Radio displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.350.40.450.50.55
ECD Automotive Design 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.80.850.90.9511.05

Emerson Radio and ECD Automotive Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-14.84-11.11-7.39-3.66-0.063.657.4411.2215.018.78 0.0130.0140.0150.0160.0170.0180.0190.020
JavaScript chart by amCharts 3.21.15MSN ECDA
       Returns  

Pair Trading with Emerson Radio and ECD Automotive

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

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