Correlation Between Xunlei and Emerson Radio

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

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

Diversification Opportunities for Xunlei and Emerson Radio

-0.06

Correlation Coefficient

Xunlei  Emerson Radio

Good diversification

The 3 months correlation between Xunlei and Emerson is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Xunlei Ltd Adr and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and Xunlei 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 Xunlei Ltd Adr 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 Xunlei i.e., Xunlei and Emerson Radio go up and down completely randomly.

Pair Corralation between Xunlei and Emerson Radio

Given the investment horizon of 90 days Xunlei Ltd Adr is expected to generate 0.72 times more return on investment than Emerson Radio. However, Xunlei Ltd Adr is 1.4 times less risky than Emerson Radio. It trades about 0.11 of its potential returns per unit of risk. Emerson Radio is currently generating about -0.03 per unit of risk. If you would invest  152.00  in Xunlei Ltd Adr on January 29, 2024 and sell it today you would earn a total of  5.00  from holding Xunlei Ltd Adr or generate 3.29% return on investment over 90 days.

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

Xunlei Ltd Adr  vs.  Emerson Radio

Xunlei Ltd Adr

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Xunlei is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Xunlei and Emerson Radio

The main advantage of trading using opposite Xunlei and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xunlei 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 Xunlei Ltd Adr 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.