Correlation Between Irobot Corp and Emerson Radio

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

Diversification Opportunities for Irobot Corp and Emerson Radio

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between Irobot and Emerson is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Irobot Corp 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 Irobot Corp 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 Irobot Corp 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 Irobot Corp i.e., Irobot Corp and Emerson Radio go up and down completely randomly.

Pair Corralation between Irobot Corp and Emerson Radio

Given the investment horizon of 90 days Irobot Corp is expected to generate 0.13 times more return on investment than Emerson Radio. However, Irobot Corp is 7.66 times less risky than Emerson Radio. It trades about -0.49 of its potential returns per unit of risk. Emerson Radio Corp is currently generating about -0.13 per unit of risk. If you would invest  5,886  in Irobot Corp on July 7, 2022 and sell it today you would lose (256.00)  from holding Irobot Corp or give up 4.35% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Irobot Corp  vs.  Emerson Radio Corp

 Performance (%) 
       Timeline  
Irobot Corp 
Irobot Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Irobot Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental drivers, Irobot Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Irobot 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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Emerson Price Channel

Irobot Corp and Emerson Radio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Irobot Corp and Emerson Radio

The main advantage of trading using opposite Irobot Corp and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Irobot Corp 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.
Irobot Corp vs. Amazon Inc
The idea behind Irobot Corp 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.
Emerson Radio vs. Amazon Inc
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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