Correlation Between Mechel OAO and Emerson Radio
Can any of the company-specific risk be diversified away by investing in both Mechel OAO 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 Mechel OAO and Emerson Radio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mechel OAO and Emerson Radio, you can compare the effects of market volatilities on Mechel OAO 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 Mechel OAO with a short position of Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mechel OAO and Emerson Radio.
Diversification Opportunities for Mechel OAO and Emerson Radio
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mechel and Emerson is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Mechel OAO and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and Mechel OAO 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 Mechel OAO 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 Mechel OAO i.e., Mechel OAO and Emerson Radio go up and down completely randomly.
Pair Corralation between Mechel OAO and Emerson Radio
Considering the 90-day investment horizon Mechel OAO is expected to under-perform the Emerson Radio. In addition to that, Mechel OAO is 9.23 times more volatile than Emerson Radio. It trades about -0.28 of its total potential returns per unit of risk. Emerson Radio is currently generating about -0.01 per unit of volatility. If you would invest 54.00 in Emerson Radio on September 4, 2024 and sell it today you would lose (14.00) from holding Emerson Radio or give up 25.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 2.63% |
| Values | Daily Returns |
Mechel OAO vs. Emerson Radio
Performance |
| Timeline |
| Mechel OAO |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Emerson Radio |
Mechel OAO and Emerson Radio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mechel OAO and Emerson Radio
The main advantage of trading using opposite Mechel OAO and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mechel OAO 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.| Mechel OAO vs. Tianjin Capital Environmental | Mechel OAO vs. Treasury Wine Estates | Mechel OAO vs. Grupo Simec SAB | Mechel OAO vs. ArcelorMittal SA ADR |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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