Correlation Between Emerson Radio and Alta Equipment
Can any of the company-specific risk be diversified away by investing in both Emerson Radio and Alta Equipment 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 Alta Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Radio and Alta Equipment Group, you can compare the effects of market volatilities on Emerson Radio and Alta Equipment 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 Alta Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and Alta Equipment.
Diversification Opportunities for Emerson Radio and Alta Equipment
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Emerson and Alta is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and Alta Equipment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Equipment Group 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 Alta Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Equipment Group has no effect on the direction of Emerson Radio i.e., Emerson Radio and Alta Equipment go up and down completely randomly.
Pair Corralation between Emerson Radio and Alta Equipment
Considering the 90-day investment horizon Emerson Radio is expected to under-perform the Alta Equipment. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Radio is 1.11 times less risky than Alta Equipment. The stock trades about -0.04 of its potential returns per unit of risk. The Alta Equipment Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 782.00 in Alta Equipment Group on September 1, 2024 and sell it today you would earn a total of 9.00 from holding Alta Equipment Group or generate 1.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerson Radio vs. Alta Equipment Group
Performance |
| Timeline |
| Emerson Radio |
| Alta Equipment Group |
Emerson Radio and Alta Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Radio and Alta Equipment
The main advantage of trading using opposite Emerson Radio and Alta Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Radio position performs unexpectedly, Alta Equipment 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 Alta Equipment will offset losses from the drop in Alta Equipment's 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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