Correlation Between Chemours and Emerson Radio

Can any of the company-specific risk be diversified away by investing in both Chemours 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 Chemours and Emerson Radio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chemours Co and Emerson Radio, you can compare the effects of market volatilities on Chemours 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 Chemours with a short position of Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemours and Emerson Radio.

Diversification Opportunities for Chemours and Emerson Radio

0.42

Correlation Coefficient

Chemours  Emerson Radio

Very weak diversification

The 3 months correlation between Chemours and Emerson is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Chemours Co and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and Chemours 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 Chemours Co 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 Chemours i.e., Chemours and Emerson Radio go up and down completely randomly.

Pair Corralation between Chemours and Emerson Radio

Allowing for the 90-day total investment horizon Chemours Co is expected to under-perform the Emerson Radio. In addition to that, Chemours is 1.09 times more volatile than Emerson Radio. It trades about -0.25 of its total potential returns per unit of risk. Emerson Radio is currently generating about -0.16 per unit of volatility. If you would invest  56.00  in Emerson Radio on March 28, 2024 and sell it today you would lose (4.79) from holding Emerson Radio or give up 8.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Chemours Co  vs.  Emerson Radio

Chemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Emerson Radio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerson Radio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Emerson Radio is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Chemours and Emerson Radio

The main advantage of trading using opposite Chemours and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemours 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.

The idea behind Chemours Co and Emerson Radio pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.