Correlation Between Emerson Radio and Universal Electronics
Can any of the company-specific risk be diversified away by investing in both Emerson Radio and Universal Electronics 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 Universal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Radio and Universal Electronics, you can compare the effects of market volatilities on Emerson Radio and Universal Electronics 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 Universal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and Universal Electronics.
Diversification Opportunities for Emerson Radio and Universal Electronics
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerson and Universal is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and Universal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Electronics 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 Universal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Electronics has no effect on the direction of Emerson Radio i.e., Emerson Radio and Universal Electronics go up and down completely randomly.
Pair Corralation between Emerson Radio and Universal Electronics
Considering the 90-day investment horizon Emerson Radio is expected to generate 5.69 times less return on investment than Universal Electronics. But when comparing it to its historical volatility, Emerson Radio is 1.34 times less risky than Universal Electronics. It trades about 0.05 of its potential returns per unit of risk. Universal Electronics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,002 in Universal Electronics on February 1, 2024 and sell it today you would earn a total of 127.00 from holding Universal Electronics or generate 12.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Emerson Radio vs. Universal Electronics
Performance |
Timeline |
Emerson Radio |
Universal Electronics |
Emerson Radio and Universal Electronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Emerson Radio and Universal Electronics
The main advantage of trading using opposite Emerson Radio and Universal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Radio position performs unexpectedly, Universal Electronics 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 Universal Electronics will offset losses from the drop in Universal Electronics' long position.Emerson Radio vs. VOXX International | Emerson Radio vs. LG Display Co | Emerson Radio vs. Vizio Holding Corp | Emerson Radio vs. Turtle Beach Corp |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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