Correlation Between Emerson Radio and Aquestive Therapeutics

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

By analyzing existing cross correlation between Emerson Radio and Aquestive Therapeutics, you can compare the effects of market volatilities on Emerson Radio and Aquestive Therapeutics 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 Aquestive Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and Aquestive Therapeutics.

Diversification Opportunities for Emerson Radio and Aquestive Therapeutics

0.48

Correlation Coefficient

Emerson Radio  Aquestive Therapeutics

Very weak diversification

The 3 months correlation between Emerson and Aquestive is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and Aquestive Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquestive Therapeutics 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 Aquestive Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquestive Therapeutics has no effect on the direction of Emerson Radio i.e., Emerson Radio and Aquestive Therapeutics go up and down completely randomly.

Pair Corralation between Emerson Radio and Aquestive Therapeutics

Considering the 90-day investment horizon Emerson Radio is expected to under-perform the Aquestive Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Radio is 1.23 times less risky than Aquestive Therapeutics. The stock trades about -0.03 of its potential returns per unit of risk. The Aquestive Therapeutics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  423.00  in Aquestive Therapeutics on September 5, 2024 and sell it today you would earn a total of  16.00  from holding Aquestive Therapeutics or generate 3.78% return on investment over 90 days.

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

Emerson Radio  vs.  Aquestive Therapeutics

Emerson Radio

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Aquestive Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aquestive Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Aquestive Therapeutics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Emerson Radio and Aquestive Therapeutics

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

The idea behind Emerson Radio and Aquestive Therapeutics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.