Correlation Between Emerson Electric and 3M
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and 3M 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 3M 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 3M Company, you can compare the effects of market volatilities on Emerson Electric and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and 3M.
Diversification Opportunities for Emerson Electric and 3M
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerson and 3M is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric Co and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Emerson Electric i.e., Emerson Electric and 3M go up and down completely randomly.
Pair Corralation between Emerson Electric and 3M
Assuming the 90 days horizon Emerson Electric Co is expected to generate 1.19 times more return on investment than 3M. However, Emerson Electric is 1.19 times more volatile than 3M Company. It trades about 0.07 of its potential returns per unit of risk. 3M Company is currently generating about 0.04 per unit of risk. If you would invest 12,043 in Emerson Electric Co on September 13, 2024 and sell it today you would earn a total of 243.00 from holding Emerson Electric Co or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerson Electric Co vs. 3M Company
Performance |
| Timeline |
| Emerson Electric |
| 3M Company |
Emerson Electric and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and 3M
The main advantage of trading using opposite Emerson Electric and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.| Emerson Electric vs. Mitsubishi Gas Chemical | Emerson Electric vs. HYATT HOTELS A | Emerson Electric vs. AIR PRODCHEMICALS | Emerson Electric vs. Silicon Motion Technology |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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