Correlation Between Emerald Growth and Emerald Insights

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

By analyzing existing cross correlation between Emerald Growth Fund and Emerald Insights Fund, you can compare the effects of market volatilities on Emerald Growth and Emerald Insights 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 Emerald Growth with a short position of Emerald Insights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerald Growth and Emerald Insights.

Diversification Opportunities for Emerald Growth and Emerald Insights

0.74

Correlation Coefficient

Emerald Growth  Emerald Insights

Poor diversification

The 3 months correlation between Emerald and Emerald is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Emerald Growth Fund and Emerald Insights Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Insights and Emerald Growth 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 Emerald Growth Fund are associated (or correlated) with Emerald Insights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Insights has no effect on the direction of Emerald Growth i.e., Emerald Growth and Emerald Insights go up and down completely randomly.

Pair Corralation between Emerald Growth and Emerald Insights

Assuming the 90 days horizon Emerald Growth Fund is expected to under-perform the Emerald Insights. In addition to that, Emerald Growth is 1.67 times more volatile than Emerald Insights Fund. It trades about -0.02 of its total potential returns per unit of risk. Emerald Insights Fund is currently generating about 0.11 per unit of volatility. If you would invest  2,021  in Emerald Insights Fund on September 28, 2024 and sell it today you would earn a total of  159.00  from holding Emerald Insights Fund or generate 7.87% return on investment over 90 days.

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

Emerald Growth Fund  vs.  Emerald Insights Fund

Emerald Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerald Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Emerald Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerald Insights

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Insights Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Emerald Insights may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Emerald Growth and Emerald Insights

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

The idea behind Emerald Growth Fund and Emerald Insights Fund 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.