Correlation Between Global E and Emerge Commerce

Can any of the company-specific risk be diversified away by investing in both Global E and Emerge Commerce 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 Global E and Emerge Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global E Online and Emerge Commerce, you can compare the effects of market volatilities on Global E and Emerge Commerce 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 Global E with a short position of Emerge Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and Emerge Commerce.

Diversification Opportunities for Global E and Emerge Commerce

0.03

Correlation Coefficient

Global E  Emerge Commerce

Significant diversification

The 3 months correlation between Global and Emerge is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Emerge Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerge Commerce and Global E 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 Global E Online are associated (or correlated) with Emerge Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerge Commerce has no effect on the direction of Global E i.e., Global E and Emerge Commerce go up and down completely randomly.

Pair Corralation between Global E and Emerge Commerce

Given the investment horizon of 90 days Global E is expected to generate 19.09 times less return on investment than Emerge Commerce. But when comparing it to its historical volatility, Global E Online is 51.49 times less risky than Emerge Commerce. It trades about 0.3 of its potential returns per unit of risk. Emerge Commerce is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Emerge Commerce on September 3, 2024 and sell it today you would earn a total of  0.01  from holding Emerge Commerce or generate 0.4% return on investment over 90 days.

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

Global E Online  vs.  Emerge Commerce

Global E Online

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Emerge Commerce

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerge Commerce are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, Emerge Commerce reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global E and Emerge Commerce

The main advantage of trading using opposite Global E and Emerge Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E position performs unexpectedly, Emerge Commerce 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 Emerge Commerce will offset losses from the drop in Emerge Commerce's long position.

The idea behind Global E Online and Emerge Commerce 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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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..