Correlation Between American Environmental and Emerson Radio

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

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

Diversification Opportunities for American Environmental and Emerson Radio

0.0

Correlation Coefficient

American Environmental  Emerson Radio

Pay attention - limited upside

The 3 months correlation between American and Emerson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Environmental and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and American Environmental 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 American Environmental are associated (or correlated) with Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of American Environmental i.e., American Environmental and Emerson Radio go up and down completely randomly.

Pair Corralation between American Environmental and Emerson Radio

If you would invest  0.01  in American Environmental on October 4, 2024 and sell it today you would earn a total of  0.00  from holding American Environmental or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.73%
Values	Daily Returns

American Environmental  vs.  Emerson Radio

American Environmental

Risk-Adjusted Performance

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Very Weak

Over the last 90 days American Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, American Environmental is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with American Environmental and Emerson Radio

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

The idea behind American Environmental and Emerson Radio 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.