Correlation Between Stagwell and Emerson Radio

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

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

Diversification Opportunities for Stagwell and Emerson Radio

-0.68

Correlation Coefficient

Stagwell  Emerson Radio

Excellent diversification

The 3 months correlation between Stagwell and Emerson is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Stagwell and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio and Stagwell 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 Stagwell 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 has no effect on the direction of Stagwell i.e., Stagwell and Emerson Radio go up and down completely randomly.

Pair Corralation between Stagwell and Emerson Radio

Given the investment horizon of 90 days Stagwell is expected to generate 0.71 times more return on investment than Emerson Radio. However, Stagwell is 1.42 times less risky than Emerson Radio. It trades about 0.02 of its potential returns per unit of risk. Emerson Radio is currently generating about -0.04 per unit of risk. If you would invest  725.00  in Stagwell on September 15, 2024 and sell it today you would earn a total of  4.00  from holding Stagwell or generate 0.55% return on investment over 90 days.

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

Stagwell  vs.  Emerson Radio

Stagwell

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stagwell are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Stagwell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Stagwell and Emerson Radio

The main advantage of trading using opposite Stagwell and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stagwell 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.

The idea behind Stagwell and Emerson Radio 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 Global Correlations module to find global opportunities by holding instruments from different markets.