Correlation Between Barnes and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Barnes and Emerson Electric 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 Barnes and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnes Group and Emerson Electric, you can compare the effects of market volatilities on Barnes and Emerson Electric 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 Barnes with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and Emerson Electric.
Diversification Opportunities for Barnes and Emerson Electric
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barnes and Emerson is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Barnes 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 Barnes Group are associated (or correlated) with Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Barnes i.e., Barnes and Emerson Electric go up and down completely randomly.
Pair Corralation between Barnes and Emerson Electric
Taking into account the 90-day investment horizon Barnes is expected to generate 116.86 times less return on investment than Emerson Electric. But when comparing it to its historical volatility, Barnes Group is 16.75 times less risky than Emerson Electric. It trades about 0.05 of its potential returns per unit of risk. Emerson Electric is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 10,807 in Emerson Electric on August 24, 2024 and sell it today you would earn a total of 2,020 from holding Emerson Electric or generate 18.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barnes Group vs. Emerson Electric
Performance |
| Timeline |
| Barnes Group |
| Emerson Electric |
Barnes and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barnes and Emerson Electric
The main advantage of trading using opposite Barnes and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, Emerson Electric 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 Electric will offset losses from the drop in Emerson Electric's long position.| Barnes vs. Helios Technologies | Barnes vs. Enpro Industries | Barnes vs. Omega Flex | Barnes vs. Luxfer Holdings PLC |
| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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