Correlation Between Emerson Radio and Kellanova

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Can any of the company-specific risk be diversified away by investing in both Emerson Radio and Kellanova 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 Kellanova into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Radio and Kellanova, you can compare the effects of market volatilities on Emerson Radio and Kellanova 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 Kellanova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and Kellanova.

Diversification Opportunities for Emerson Radio and Kellanova

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between Emerson and Kellanova is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova 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 Kellanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellanova has no effect on the direction of Emerson Radio i.e., Emerson Radio and Kellanova go up and down completely randomly.

Pair Corralation between Emerson Radio and Kellanova

Considering the 90-day investment horizon Emerson Radio is expected to generate 2.16 times more return on investment than Kellanova. However, Emerson Radio is 2.16 times more volatile than Kellanova. It trades about -0.01 of its potential returns per unit of risk. Kellanova is currently generating about -0.01 per unit of risk. If you would invest  69.00  in Emerson Radio on November 24, 2023 and sell it today you would lose (17.00) from holding Emerson Radio or give up 24.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Emerson Radio  vs.  Kellanova

 Performance 
       Timeline  
Emerson Radio 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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.
Kellanova 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Emerson Radio and Kellanova Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Emerson Radio and Kellanova

The main advantage of trading using opposite Emerson Radio and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Radio position performs unexpectedly, Kellanova 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 Kellanova will offset losses from the drop in Kellanova's long position.
The idea behind Emerson Radio and Kellanova 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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