Correlation Between Emerson Radio and Flutter Entertainment

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

By analyzing existing cross correlation between Emerson Radio and Flutter Entertainment plc, you can compare the effects of market volatilities on Emerson Radio and Flutter Entertainment 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 Flutter Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and Flutter Entertainment.

Diversification Opportunities for Emerson Radio and Flutter Entertainment

-0.77

Correlation Coefficient

Emerson Radio  Flutter Entertainment

Pay attention - limited upside

The 3 months correlation between Emerson and Flutter is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and Flutter Entertainment plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment plc 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 Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment plc has no effect on the direction of Emerson Radio i.e., Emerson Radio and Flutter Entertainment go up and down completely randomly.

Pair Corralation between Emerson Radio and Flutter Entertainment

Considering the 90-day investment horizon Emerson Radio is expected to generate 5.81 times more return on investment than Flutter Entertainment. However, Emerson Radio is 5.81 times more volatile than Flutter Entertainment plc. It trades about 0.19 of its potential returns per unit of risk. Flutter Entertainment plc is currently generating about 0.04 per unit of risk. If you would invest  42.00  in Emerson Radio on October 23, 2024 and sell it today you would earn a total of  9.00  from holding Emerson Radio or generate 21.43% 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.  Flutter Entertainment plc

Emerson Radio

Risk-Adjusted Performance

0 of 100

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 current stock price disarray, may contribute to short-term losses for the investors.

Flutter Entertainment plc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flutter Entertainment plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Flutter Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerson Radio and Flutter Entertainment

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

The idea behind Emerson Radio and Flutter Entertainment plc 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 Transaction History module to view history of all your transactions and understand their impact on performance.