Correlation Between Emerson Electric and Ambev SA
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Ambev SA 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 Ambev SA 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 Ambev SA, you can compare the effects of market volatilities on Emerson Electric and Ambev SA 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 Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Ambev SA.
Diversification Opportunities for Emerson Electric and Ambev SA
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Emerson and Ambev is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric Co and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA 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 Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA has no effect on the direction of Emerson Electric i.e., Emerson Electric and Ambev SA go up and down completely randomly.
Pair Corralation between Emerson Electric and Ambev SA
Assuming the 90 days trading horizon Emerson Electric Co is expected to generate 0.96 times more return on investment than Ambev SA. However, Emerson Electric Co is 1.05 times less risky than Ambev SA. It trades about 0.1 of its potential returns per unit of risk. Ambev SA is currently generating about -0.02 per unit of risk. If you would invest 203,123 in Emerson Electric Co on November 2, 2024 and sell it today you would earn a total of 61,528 from holding Emerson Electric Co or generate 30.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerson Electric Co vs. Ambev SA
Performance |
| Timeline |
| Emerson Electric |
| Ambev SA |
Emerson Electric and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Ambev SA
The main advantage of trading using opposite Emerson Electric and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Ambev SA 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 Ambev SA will offset losses from the drop in Ambev SA's long position.| Emerson Electric vs. Honeywell International | Emerson Electric vs. 3M Company | Emerson Electric vs. iShares Global Timber | Emerson Electric vs. Vanguard World |
| Ambev SA vs. Micron Technology | Ambev SA vs. GMxico Transportes SAB | Ambev SA vs. Grupo Carso SAB | Ambev SA vs. Delta Air Lines |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |