Correlation Between Emerson Radio and ACAFP

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

By analyzing existing cross correlation between Emerson Radio and ACAFP 4125 10 JAN 27, you can compare the effects of market volatilities on Emerson Radio and ACAFP 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 ACAFP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and ACAFP.

Diversification Opportunities for Emerson Radio and ACAFP

0.24

Correlation Coefficient

Emerson Radio  ACAFP

Modest diversification

The 3 months correlation between Emerson and ACAFP is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and ACAFP 4125 10 JAN 27 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACAFP 4125 10 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 ACAFP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACAFP 4125 10 has no effect on the direction of Emerson Radio i.e., Emerson Radio and ACAFP go up and down completely randomly.

Pair Corralation between Emerson Radio and ACAFP

Considering the 90-day investment horizon Emerson Radio is expected to generate 6.09 times more return on investment than ACAFP. However, Emerson Radio is 6.09 times more volatile than ACAFP 4125 10 JAN 27. It trades about 0.01 of its potential returns per unit of risk. ACAFP 4125 10 JAN 27 is currently generating about 0.02 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 Together
Strength	Very Weak
Accuracy	47.68%
Values	Daily Returns

Emerson Radio  vs.  ACAFP 4125 10 JAN 27

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.

ACAFP 4125 10

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days ACAFP 4125 10 JAN 27 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ACAFP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Emerson Radio and ACAFP

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

The idea behind Emerson Radio and ACAFP 4125 10 JAN 27 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.