Correlation Between Plby and Emerson Radio

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

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

Diversification Opportunities for Plby and Emerson Radio

-0.57

Correlation Coefficient

Plby  Emerson Radio

Excellent diversification

The 3 months correlation between Plby and Emerson is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Plby Group and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and Plby 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 Plby Group 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 Plby i.e., Plby and Emerson Radio go up and down completely randomly.

Pair Corralation between Plby and Emerson Radio

Given the investment horizon of 90 days Plby is expected to generate 1.76 times less return on investment than Emerson Radio. But when comparing it to its historical volatility, Plby Group is 1.39 times less risky than Emerson Radio. It trades about 0.15 of its potential returns per unit of risk. Emerson Radio is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Emerson Radio on October 24, 2024 and sell it today you would earn a total of  9.00  from holding Emerson Radio or generate 21.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Plby Group  vs.  Emerson Radio

Plby Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plby Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Plby showed solid returns over the last few months and may actually be approaching a breakup point.

Emerson Radio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Radio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Plby and Emerson Radio

The main advantage of trading using opposite Plby and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plby 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 Plby Group 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.