Correlation Between Zepp Health and Emerson Radio

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

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

Diversification Opportunities for Zepp Health and Emerson Radio

0.71

Correlation Coefficient

Zepp Health  Emerson Radio

Poor diversification

The 3 months correlation between Zepp and Emerson is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Zepp Health Corp and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and Zepp Health 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 Zepp Health Corp 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 Zepp Health i.e., Zepp Health and Emerson Radio go up and down completely randomly.

Pair Corralation between Zepp Health and Emerson Radio

Given the investment horizon of 90 days Zepp Health Corp is expected to generate 1.41 times more return on investment than Emerson Radio. However, Zepp Health is 1.41 times more volatile than Emerson Radio. It trades about 0.05 of its potential returns per unit of risk. Emerson Radio is currently generating about -0.01 per unit of risk. If you would invest  240.00  in Zepp Health Corp on September 24, 2024 and sell it today you would earn a total of  39.50  from holding Zepp Health Corp or generate 16.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Zepp Health Corp  vs.  Emerson Radio

Zepp Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zepp Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Zepp Health is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail 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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Zepp Health and Emerson Radio

The main advantage of trading using opposite Zepp Health and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zepp Health 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 Zepp Health Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.