Correlation Between Emerson Radio and Allergan Plc

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

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

Diversification Opportunities for Emerson Radio and Allergan Plc

0.0

Correlation Coefficient

Emerson Radio  Allergan Plc

Pay attention - limited upside

The 3 months correlation between Emerson and Allergan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and Allergan Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allergan Plc 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 Allergan Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allergan Plc has no effect on the direction of Emerson Radio i.e., Emerson Radio and Allergan Plc go up and down completely randomly.

Pair Corralation between Emerson Radio and Allergan Plc

If you would invest  60.00  in Emerson Radio on January 31, 2024 and sell it today you would lose (3.00) from holding Emerson Radio or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Emerson Radio  vs.  Allergan Plc

Emerson Radio

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Radio are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Emerson Radio may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Allergan Plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Emerson Radio and Allergan Plc

The main advantage of trading using opposite Emerson Radio and Allergan Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Radio position performs unexpectedly, Allergan Plc 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 Allergan Plc will offset losses from the drop in Allergan Plc's long position.

The idea behind Emerson Radio and Allergan Plc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.