Correlation Between Intel and EMCORE
Can any of the company-specific risk be diversified away by investing in both Intel and EMCORE 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 Intel and EMCORE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intel and EMCORE, you can compare the effects of market volatilities on Intel and EMCORE 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 Intel with a short position of EMCORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and EMCORE.
Diversification Opportunities for Intel and EMCORE
Poor diversification
The 3 months correlation between Intel and EMCORE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Intel and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE and Intel 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 Intel are associated (or correlated) with EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of Intel i.e., Intel and EMCORE go up and down completely randomly.
Pair Corralation between Intel and EMCORE
Given the investment horizon of 90 days Intel is expected to generate 0.66 times more return on investment than EMCORE. However, Intel is 1.52 times less risky than EMCORE. It trades about -0.35 of its potential returns per unit of risk. EMCORE is currently generating about -0.41 per unit of risk. If you would invest 4,183 in Intel on January 24, 2024 and sell it today you would lose (742.00) from holding Intel or give up 17.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intel vs. EMCORE
Performance |
| Timeline |
| Intel |
| EMCORE |
Intel and EMCORE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intel and EMCORE
The main advantage of trading using opposite Intel and EMCORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel position performs unexpectedly, EMCORE 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 EMCORE will offset losses from the drop in EMCORE's long position.The idea behind Intel and EMCORE 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.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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