Correlation Between China Yuchai and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both China Yuchai 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 China Yuchai and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Yuchai International and Emerson Electric, you can compare the effects of market volatilities on China Yuchai 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 China Yuchai with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Yuchai and Emerson Electric.
Diversification Opportunities for China Yuchai and Emerson Electric
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Emerson is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Yuchai International and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and China Yuchai 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 China Yuchai International 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 China Yuchai i.e., China Yuchai and Emerson Electric go up and down completely randomly.
Pair Corralation between China Yuchai and Emerson Electric
Considering the 90-day investment horizon China Yuchai is expected to generate 1.3 times less return on investment than Emerson Electric. In addition to that, China Yuchai is 1.23 times more volatile than Emerson Electric. It trades about 0.05 of its total potential returns per unit of risk. Emerson Electric is currently generating about 0.08 per unit of volatility. If you would invest 10,539 in Emerson Electric on August 27, 2024 and sell it today you would earn a total of 2,468 from holding Emerson Electric or generate 23.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Yuchai International vs. Emerson Electric
Performance |
| Timeline |
| China Yuchai Interna |
| Emerson Electric |
China Yuchai and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Yuchai and Emerson Electric
The main advantage of trading using opposite China Yuchai and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Yuchai 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.| China Yuchai vs. China Natural Resources | China Yuchai vs. Sonida Senior Living | China Yuchai vs. UTStarcom Holdings Corp | China Yuchai vs. Deswell Industries |
| Emerson Electric vs. Graco Inc | Emerson Electric vs. Franklin Electric Co | Emerson Electric vs. Flowserve | Emerson Electric vs. Donaldson |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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