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

 Performance
 Timeline

### 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.
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 Kellanova Correlation Profile

### 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.
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## Emerson Radio and Kellanova Volatility Contrast

 Predicted Return Density
 Returns

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.