Correlation Between Emerson Electric and John Bean
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and John Bean 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 Electric and John Bean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric Co and John Bean Technologies, you can compare the effects of market volatilities on Emerson Electric and John Bean 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 Electric with a short position of John Bean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and John Bean.
Diversification Opportunities for Emerson Electric and John Bean
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Emerson and John is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric Co and John Bean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Bean Technologies and Emerson Electric 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 Electric Co are associated (or correlated) with John Bean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Bean Technologies has no effect on the direction of Emerson Electric i.e., Emerson Electric and John Bean go up and down completely randomly.
Pair Corralation between Emerson Electric and John Bean
Assuming the 90 days horizon Emerson Electric Co is expected to generate 1.78 times more return on investment than John Bean. However, Emerson Electric is 1.78 times more volatile than John Bean Technologies. It trades about 0.31 of its potential returns per unit of risk. John Bean Technologies is currently generating about 0.24 per unit of risk. If you would invest 9,985 in Emerson Electric Co on August 30, 2024 and sell it today you would earn a total of 2,735 from holding Emerson Electric Co or generate 27.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Emerson Electric Co vs. John Bean Technologies
Performance |
| Timeline |
| Emerson Electric |
| John Bean Technologies |
Emerson Electric and John Bean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and John Bean
The main advantage of trading using opposite Emerson Electric and John Bean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, John Bean 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 John Bean will offset losses from the drop in John Bean's long position.| Emerson Electric vs. ABB | Emerson Electric vs. Superior Plus Corp | Emerson Electric vs. NMI Holdings | Emerson Electric vs. SIVERS SEMICONDUCTORS AB |
| John Bean vs. Waste Management | John Bean vs. CEOTRONICS | John Bean vs. Ares Management Corp | John Bean vs. CompuGroup Medical SE |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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