Correlation Between Emerson Radio and Summit Therapeutics

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

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

Diversification Opportunities for Emerson Radio and Summit Therapeutics

0.6

Correlation Coefficient

Emerson Radio  Summit Therapeutics

Poor diversification

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

Pair Corralation between Emerson Radio and Summit Therapeutics

Considering the 90-day investment horizon Emerson Radio is expected to generate 0.57 times more return on investment than Summit Therapeutics. However, Emerson Radio is 1.77 times less risky than Summit Therapeutics. It trades about -0.1 of its potential returns per unit of risk. Summit Therapeutics PLC is currently generating about -0.07 per unit of risk. If you would invest  52.00  in Emerson Radio on September 24, 2024 and sell it today you would lose (9.00) from holding Emerson Radio or give up 17.31% of portfolio value over 90 days.

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

Emerson Radio  vs.  Summit Therapeutics PLC

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.

Summit Therapeutics PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Therapeutics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Emerson Radio and Summit Therapeutics

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

The idea behind Emerson Radio and Summit Therapeutics 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.