Correlation Between Big Tree and Emerson Radio
Can any of the company-specific risk be diversified away by investing in both Big Tree 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 Big Tree and Emerson Radio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Tree Cloud and Emerson Radio, you can compare the effects of market volatilities on Big Tree 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 Big Tree with a short position of Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tree and Emerson Radio.
Diversification Opportunities for Big Tree and Emerson Radio
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Big and Emerson is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Big Tree Cloud and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and Big Tree 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 Big Tree Cloud 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 Big Tree i.e., Big Tree and Emerson Radio go up and down completely randomly.
Pair Corralation between Big Tree and Emerson Radio
Assuming the 90 days horizon Big Tree Cloud is expected to generate 4.42 times more return on investment than Emerson Radio. However, Big Tree is 4.42 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 -0.27 per unit of risk. If you would invest 4.15 in Big Tree Cloud on August 28, 2024 and sell it today you would lose (0.15) from holding Big Tree Cloud or give up 3.61% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Big Tree Cloud vs. Emerson Radio
Performance |
Timeline |
Big Tree Cloud |
Emerson Radio |
Big Tree and Emerson Radio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Big Tree and Emerson Radio
The main advantage of trading using opposite Big Tree and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Tree 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.Big Tree vs. Colgate Palmolive | Big Tree vs. Estee Lauder Companies | Big Tree vs. Procter Gamble | Big Tree vs. United Guardian |
Emerson Radio vs. VOXX International | Emerson Radio vs. LG Display Co | Emerson Radio vs. Vizio Holding Corp | Emerson Radio vs. Turtle Beach Corp |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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