Correlation Between Emerson Electric and Nippon Sharyo
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Nippon Sharyo 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 Nippon Sharyo 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 Nippon Sharyo, you can compare the effects of market volatilities on Emerson Electric and Nippon Sharyo 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 Nippon Sharyo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Nippon Sharyo.
Diversification Opportunities for Emerson Electric and Nippon Sharyo
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerson and Nippon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric Co and Nippon Sharyo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Sharyo 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 Nippon Sharyo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Sharyo has no effect on the direction of Emerson Electric i.e., Emerson Electric and Nippon Sharyo go up and down completely randomly.
Pair Corralation between Emerson Electric and Nippon Sharyo
Assuming the 90 days horizon Emerson Electric Co is expected to generate 1.0 times more return on investment than Nippon Sharyo. However, Emerson Electric is 1.0 times more volatile than Nippon Sharyo. It trades about 0.07 of its potential returns per unit of risk. Nippon Sharyo is currently generating about 0.03 per unit of risk. If you would invest 8,617 in Emerson Electric Co on September 12, 2024 and sell it today you would earn a total of 3,669 from holding Emerson Electric Co or generate 42.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.7% |
| Values | Daily Returns |
Emerson Electric Co vs. Nippon Sharyo
Performance |
| Timeline |
| Emerson Electric |
| Nippon Sharyo |
Emerson Electric and Nippon Sharyo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Nippon Sharyo
The main advantage of trading using opposite Emerson Electric and Nippon Sharyo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Nippon Sharyo 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 Nippon Sharyo will offset losses from the drop in Nippon Sharyo's long position.| Emerson Electric vs. Schneider Electric SE | Emerson Electric vs. Superior Plus Corp | Emerson Electric vs. SIVERS SEMICONDUCTORS AB | Emerson Electric vs. Norsk Hydro ASA |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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