Correlation Between Emerson Electric and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on Emerson Electric and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Ross Stores.
Diversification Opportunities for Emerson Electric and Ross Stores
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerson and Ross is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric Co and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Emerson Electric i.e., Emerson Electric and Ross Stores go up and down completely randomly.
Pair Corralation between Emerson Electric and Ross Stores
Assuming the 90 days trading horizon Emerson Electric is expected to generate 8.06 times less return on investment than Ross Stores. But when comparing it to its historical volatility, Emerson Electric Co is 2.04 times less risky than Ross Stores. It trades about 0.02 of its potential returns per unit of risk. Ross Stores is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 225,658 in Ross Stores on September 4, 2024 and sell it today you would earn a total of 82,842 from holding Ross Stores or generate 36.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 31.85% |
| Values | Daily Returns |
Emerson Electric Co vs. Ross Stores
Performance |
| Timeline |
| Emerson Electric |
| Ross Stores |
Emerson Electric and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Ross Stores
The main advantage of trading using opposite Emerson Electric and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| Emerson Electric vs. Micron Technology | Emerson Electric vs. Grupo Carso SAB | Emerson Electric vs. Delta Air Lines | Emerson Electric vs. Monster Beverage Corp |
| Ross Stores vs. Grupo Hotelero Santa | Ross Stores vs. Samsung Electronics Co | Ross Stores vs. Costco Wholesale | Ross Stores vs. Deutsche Bank Aktiengesellschaft |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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