Correlation Between Emerson Radio and PEPSICO

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

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

Diversification Opportunities for Emerson Radio and PEPSICO

-0.03

Correlation Coefficient

Emerson Radio  PEPSICO

Good diversification

The 3 months correlation between Emerson and PEPSICO is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and PEPSICO INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 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 PEPSICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPSICO INC has no effect on the direction of Emerson Radio i.e., Emerson Radio and PEPSICO go up and down completely randomly.

Pair Corralation between Emerson Radio and PEPSICO

Considering the 90-day investment horizon Emerson Radio is expected to generate 14.69 times more return on investment than PEPSICO. However, Emerson Radio is 14.69 times more volatile than PEPSICO INC. It trades about 0.14 of its potential returns per unit of risk. PEPSICO INC is currently generating about -0.19 per unit of risk. If you would invest  42.00  in Emerson Radio on October 14, 2024 and sell it today you would earn a total of  6.00  from holding Emerson Radio or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Emerson Radio  vs.  PEPSICO INC

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 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.

PEPSICO INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Emerson Radio and PEPSICO

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

The idea behind Emerson Radio and PEPSICO INC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.