Correlation Between Emerson Electric and Tesla
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Tesla 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 Tesla 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 Tesla Inc, you can compare the effects of market volatilities on Emerson Electric and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Tesla.
Diversification Opportunities for Emerson Electric and Tesla
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Emerson and Tesla is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric Co and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Emerson Electric i.e., Emerson Electric and Tesla go up and down completely randomly.
Pair Corralation between Emerson Electric and Tesla
Assuming the 90 days trading horizon Emerson Electric is expected to generate 2.58 times less return on investment than Tesla. But when comparing it to its historical volatility, Emerson Electric Co is 1.53 times less risky than Tesla. It trades about 0.1 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 418,560 in Tesla Inc on November 2, 2024 and sell it today you would earn a total of 406,952 from holding Tesla Inc or generate 97.23% 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. Tesla Inc
Performance |
| Timeline |
| Emerson Electric |
| Tesla Inc |
Emerson Electric and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Tesla
The main advantage of trading using opposite Emerson Electric and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.| Emerson Electric vs. Honeywell International | Emerson Electric vs. 3M Company | Emerson Electric vs. iShares Global Timber | Emerson Electric vs. Vanguard World |
| Tesla vs. Southwest Airlines | Tesla vs. Monster Beverage Corp | Tesla vs. Samsung Electronics Co | Tesla vs. KB Home |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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