Correlation Between Emerson Radio and Ark Restaurants

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

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

Diversification Opportunities for Emerson Radio and Ark Restaurants

-0.14

Correlation Coefficient

Emerson Radio  Ark Restaurants

Good diversification

The 3 months correlation between Emerson and Ark is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp 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 Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of Emerson Radio i.e., Emerson Radio and Ark Restaurants go up and down completely randomly.

Pair Corralation between Emerson Radio and Ark Restaurants

Considering the 90-day investment horizon Emerson Radio is expected to under-perform the Ark Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Radio is 1.03 times less risky than Ark Restaurants. The stock trades about -0.02 of its potential returns per unit of risk. The Ark Restaurants Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,393  in Ark Restaurants Corp on September 15, 2024 and sell it today you would lose (45.00) from holding Ark Restaurants Corp or give up 3.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.18%
Values	Daily Returns

Emerson Radio  vs.  Ark Restaurants Corp

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 conflicting 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.

Ark Restaurants Corp

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking signals, Ark Restaurants reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerson Radio and Ark Restaurants

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

The idea behind Emerson Radio and Ark Restaurants 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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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.