Correlation Between Emerson Electric and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Honeywell International 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 Honeywell International 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 Honeywell International, you can compare the effects of market volatilities on Emerson Electric and Honeywell International 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 Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Honeywell International.
Diversification Opportunities for Emerson Electric and Honeywell International
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerson and Honeywell is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric Co and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International 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 Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Emerson Electric i.e., Emerson Electric and Honeywell International go up and down completely randomly.
Pair Corralation between Emerson Electric and Honeywell International
If you would invest 204,200 in Emerson Electric Co on October 29, 2024 and sell it today you would earn a total of 0.00 from holding Emerson Electric Co or generate 0.0% 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. Honeywell International
Performance |
| Timeline |
| Emerson Electric |
| Honeywell International |
Emerson Electric and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Honeywell International
The main advantage of trading using opposite Emerson Electric and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Honeywell International 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 Honeywell International will offset losses from the drop in Honeywell International's long position.| Emerson Electric vs. Southern Copper | Emerson Electric vs. McEwen Mining | Emerson Electric vs. Grupo Carso SAB | Emerson Electric vs. United States Steel |
| Honeywell International vs. 3M Company | Honeywell International vs. Emerson Electric Co | Honeywell International vs. iShares Global Timber | Honeywell International vs. Vanguard World |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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