Correlation Between Amazon and Emerson Radio

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

Diversification Opportunities for Amazon and Emerson Radio

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Amazon and Emerson is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Emerson Radio Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio Corp and Amazon 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 Amazon Inc 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 Corp has no effect on the direction of Amazon i.e., Amazon and Emerson Radio go up and down completely randomly.

Pair Corralation between Amazon and Emerson Radio

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Emerson Radio. In addition to that, Amazon is 2.05 times more volatile than Emerson Radio Corp. It trades about -0.12 of its total potential returns per unit of risk. Emerson Radio Corp is currently generating about -0.08 per unit of volatility. If you would invest  58.00  in Emerson Radio Corp on August 29, 2022 and sell it today you would lose (2.00)  from holding Emerson Radio Corp or give up 3.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Emerson Radio Corp

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Emerson Radio Corp 
Emerson Performance
0 of 100
Over the last 90 days Emerson Radio Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Emerson Price Channel

Amazon and Emerson Radio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Emerson Radio

The main advantage of trading using opposite Amazon and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
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The idea behind Amazon Inc and Emerson Radio Corp 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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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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