Correlation Between Emerson Electric and Credicorp
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Credicorp 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 Credicorp 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 Credicorp, you can compare the effects of market volatilities on Emerson Electric and Credicorp 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 Credicorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Credicorp.
Diversification Opportunities for Emerson Electric and Credicorp
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Emerson and Credicorp is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric Co and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp 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 Credicorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credicorp has no effect on the direction of Emerson Electric i.e., Emerson Electric and Credicorp go up and down completely randomly.
Pair Corralation between Emerson Electric and Credicorp
Assuming the 90 days trading horizon Emerson Electric Co is expected to generate 1.76 times more return on investment than Credicorp. However, Emerson Electric is 1.76 times more volatile than Credicorp. It trades about 0.1 of its potential returns per unit of risk. Credicorp is currently generating about 0.08 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerson Electric Co vs. Credicorp
Performance |
| Timeline |
| Emerson Electric |
| Credicorp |
Emerson Electric and Credicorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Credicorp
The main advantage of trading using opposite Emerson Electric and Credicorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Credicorp 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 Credicorp will offset losses from the drop in Credicorp's long position.| Emerson Electric vs. Honeywell International | Emerson Electric vs. 3M Company | Emerson Electric vs. iShares Global Timber | Emerson Electric vs. Vanguard World |
| Credicorp vs. Grupo Sports World | Credicorp vs. GMxico Transportes SAB | Credicorp vs. Monster Beverage Corp | Credicorp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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