Correlation Between BCE and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both BCE 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 BCE and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and Emerson Electric, you can compare the effects of market volatilities on BCE 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 BCE with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Emerson Electric.
Diversification Opportunities for BCE and Emerson Electric
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between BCE and Emerson is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and BCE 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 BCE Inc 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 BCE i.e., BCE and Emerson Electric go up and down completely randomly.
Pair Corralation between BCE and Emerson Electric
Considering the 90-day investment horizon BCE Inc is expected to under-perform the Emerson Electric. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 1.3 times less risky than Emerson Electric. The stock trades about -0.08 of its potential returns per unit of risk. The Emerson Electric is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 8,414 in Emerson Electric on January 6, 2025 and sell it today you would earn a total of 1,043 from holding Emerson Electric or generate 12.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCE Inc vs. Emerson Electric
Performance |
| Timeline |
| BCE Inc |
| Emerson Electric |
BCE and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and Emerson Electric
The main advantage of trading using opposite BCE and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE 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.| BCE vs. Rogers Communications | BCE vs. America Movil SAB | BCE vs. Telus Corp | BCE vs. Telefonica Brasil SA |
| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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