Correlation Between Emerson Radio and IRobot
Can any of the company-specific risk be diversified away by investing in both Emerson Radio and IRobot 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 IRobot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Radio and iRobot, you can compare the effects of market volatilities on Emerson Radio and IRobot 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 IRobot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and IRobot.
Diversification Opportunities for Emerson Radio and IRobot
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Emerson and IRobot is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and iRobot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iRobot 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 IRobot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iRobot has no effect on the direction of Emerson Radio i.e., Emerson Radio and IRobot go up and down completely randomly.
Pair Corralation between Emerson Radio and IRobot
Considering the 90-day investment horizon Emerson Radio is expected to generate 1.93 times less return on investment than IRobot. But when comparing it to its historical volatility, Emerson Radio is 3.03 times less risky than IRobot. It trades about 0.05 of its potential returns per unit of risk. iRobot is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 847.00 in iRobot on January 31, 2024 and sell it today you would lose (1.00) from holding iRobot or give up 0.12% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Emerson Radio vs. iRobot
Performance |
Timeline |
Emerson Radio |
iRobot |
Emerson Radio and IRobot Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Emerson Radio and IRobot
The main advantage of trading using opposite Emerson Radio and IRobot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Radio position performs unexpectedly, IRobot 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 IRobot will offset losses from the drop in IRobot's long position.Emerson Radio vs. LG Display Co | Emerson Radio vs. Zepp Health Corp | Emerson Radio vs. The Singing Machine |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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