Correlation Between Emerson Radio and NOVARTIS

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

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

Diversification Opportunities for Emerson Radio and NOVARTIS

-0.01

Correlation Coefficient

Emerson Radio  NOVARTIS

Good diversification

The 3 months correlation between Emerson and NOVARTIS is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and NOVARTIS CAP P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVARTIS CAP P 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 NOVARTIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVARTIS CAP P has no effect on the direction of Emerson Radio i.e., Emerson Radio and NOVARTIS go up and down completely randomly.

Pair Corralation between Emerson Radio and NOVARTIS

Considering the 90-day investment horizon Emerson Radio is expected to generate 5.18 times more return on investment than NOVARTIS. However, Emerson Radio is 5.18 times more volatile than NOVARTIS CAP P. It trades about 0.08 of its potential returns per unit of risk. NOVARTIS CAP P is currently generating about 0.14 per unit of risk. If you would invest  42.00  in Emerson Radio on December 23, 2024 and sell it today you would earn a total of  8.00  from holding Emerson Radio or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Emerson Radio  vs.  NOVARTIS CAP P

Emerson Radio

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Radio are ranked lower than 6 (%) 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.

NOVARTIS CAP P

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOVARTIS CAP P are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NOVARTIS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Emerson Radio and NOVARTIS

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

The idea behind Emerson Radio and NOVARTIS CAP P 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.