Correlation Between Emerson Radio and Four Leaf

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

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

Diversification Opportunities for Emerson Radio and Four Leaf

-0.6

Correlation Coefficient

Emerson Radio  Four Leaf

Excellent diversification

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

Pair Corralation between Emerson Radio and Four Leaf

Considering the 90-day investment horizon Emerson Radio is expected to generate 14.26 times more return on investment than Four Leaf. However, Emerson Radio is 14.26 times more volatile than Four Leaf Acquisition. It trades about 0.01 of its potential returns per unit of risk. Four Leaf Acquisition is currently generating about 0.09 per unit of risk. If you would invest  56.00  in Emerson Radio on October 11, 2024 and sell it today you would lose (2.00) from holding Emerson Radio or give up 3.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	83.64%
Values	Daily Returns

Emerson Radio  vs.  Four Leaf Acquisition

Emerson Radio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Radio are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Emerson Radio may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Four Leaf Acquisition

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Four Leaf Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Four Leaf is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Emerson Radio and Four Leaf

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

The idea behind Emerson Radio and Four Leaf Acquisition 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.