Correlation Between Emerson Radio and Turtle Beach

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

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

Diversification Opportunities for Emerson Radio and Turtle Beach

0.05

Correlation Coefficient

Emerson Radio  Turtle Beach

Significant diversification

The 3 months correlation between Emerson and Turtle is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and Turtle Beach Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Turtle Beach Corp 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 Turtle Beach. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Turtle Beach Corp has no effect on the direction of Emerson Radio i.e., Emerson Radio and Turtle Beach go up and down completely randomly.

Pair Corralation between Emerson Radio and Turtle Beach

Considering the 90-day investment horizon Emerson Radio is expected to generate 4.72 times less return on investment than Turtle Beach. But when comparing it to its historical volatility, Emerson Radio is 2.98 times less risky than Turtle Beach. It trades about 0.09 of its potential returns per unit of risk. Turtle Beach Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,174  in Turtle Beach Corp on January 19, 2024 and sell it today you would earn a total of  330.00  from holding Turtle Beach Corp or generate 28.11% return on investment over 90 days.

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

Emerson Radio  vs.  Turtle Beach Corp

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.

Turtle Beach Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Turtle Beach Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Turtle Beach reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerson Radio and Turtle Beach

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

The idea behind Emerson Radio and Turtle Beach Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.