Correlation Between EMERSON ELECTRIC and RCM TECHNOLOGIES
Can any of the company-specific risk be diversified away by investing in both EMERSON ELECTRIC and RCM TECHNOLOGIES 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 RCM TECHNOLOGIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMERSON ELECTRIC and RCM TECHNOLOGIES, you can compare the effects of market volatilities on EMERSON ELECTRIC and RCM TECHNOLOGIES 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 RCM TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMERSON ELECTRIC and RCM TECHNOLOGIES.
Diversification Opportunities for EMERSON ELECTRIC and RCM TECHNOLOGIES
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EMERSON and RCM is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding EMERSON ELECTRIC and RCM TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCM 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 are associated (or correlated) with RCM TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCM TECHNOLOGIES has no effect on the direction of EMERSON ELECTRIC i.e., EMERSON ELECTRIC and RCM TECHNOLOGIES go up and down completely randomly.
Pair Corralation between EMERSON ELECTRIC and RCM TECHNOLOGIES
Assuming the 90 days trading horizon EMERSON ELECTRIC is expected to generate 0.51 times more return on investment than RCM TECHNOLOGIES. However, EMERSON ELECTRIC is 1.95 times less risky than RCM TECHNOLOGIES. It trades about 0.09 of its potential returns per unit of risk. RCM TECHNOLOGIES is currently generating about 0.01 per unit of risk. If you would invest 8,570 in EMERSON ELECTRIC on September 12, 2024 and sell it today you would earn a total of 3,876 from holding EMERSON ELECTRIC or generate 45.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMERSON ELECTRIC vs. RCM TECHNOLOGIES
Performance |
| Timeline |
| EMERSON ELECTRIC |
| RCM TECHNOLOGIES |
EMERSON ELECTRIC and RCM TECHNOLOGIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMERSON ELECTRIC and RCM TECHNOLOGIES
The main advantage of trading using opposite EMERSON ELECTRIC and RCM TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMERSON ELECTRIC position performs unexpectedly, RCM TECHNOLOGIES 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 RCM TECHNOLOGIES will offset losses from the drop in RCM TECHNOLOGIES's long position.| EMERSON ELECTRIC vs. RCM TECHNOLOGIES | EMERSON ELECTRIC vs. THORNEY TECHS LTD | EMERSON ELECTRIC vs. Digilife Technologies Limited | EMERSON ELECTRIC vs. BE Semiconductor Industries |
| RCM TECHNOLOGIES vs. Apple Inc | RCM TECHNOLOGIES vs. Apple Inc | RCM TECHNOLOGIES vs. Apple Inc | RCM TECHNOLOGIES vs. Apple Inc |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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