Correlation Between Emerson Radio and WALGREENS

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

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

Diversification Opportunities for Emerson Radio and WALGREENS

0.26

Correlation Coefficient

Emerson Radio  WALGREENS

Modest diversification

The 3 months correlation between Emerson and WALGREENS is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and WALGREENS BOOTS ALLIANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WALGREENS BOOTS ALLIANCE 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 WALGREENS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WALGREENS BOOTS ALLIANCE has no effect on the direction of Emerson Radio i.e., Emerson Radio and WALGREENS go up and down completely randomly.

Pair Corralation between Emerson Radio and WALGREENS

Considering the 90-day investment horizon Emerson Radio is expected to generate 1.56 times more return on investment than WALGREENS. However, Emerson Radio is 1.56 times more volatile than WALGREENS BOOTS ALLIANCE. It trades about 0.01 of its potential returns per unit of risk. WALGREENS BOOTS ALLIANCE is currently generating about 0.01 per unit of risk. If you would invest  55.00  in Emerson Radio on October 21, 2024 and sell it today you would lose (4.00) from holding Emerson Radio or give up 7.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.81%
Values	Daily Returns

Emerson Radio  vs.  WALGREENS BOOTS ALLIANCE

Emerson Radio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Radio are ranked lower than 2 (%) 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.

WALGREENS BOOTS ALLIANCE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WALGREENS BOOTS ALLIANCE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, WALGREENS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerson Radio and WALGREENS

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

The idea behind Emerson Radio and WALGREENS BOOTS ALLIANCE 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.