Correlation Between Emerson Electric and Barnes
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Barnes 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 Barnes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Barnes Group, you can compare the effects of market volatilities on Emerson Electric and Barnes 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 Barnes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Barnes.
Diversification Opportunities for Emerson Electric and Barnes
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerson and Barnes is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group 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 are associated (or correlated) with Barnes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnes Group has no effect on the direction of Emerson Electric i.e., Emerson Electric and Barnes go up and down completely randomly.
Pair Corralation between Emerson Electric and Barnes
Considering the 90-day investment horizon Emerson Electric is expected to generate 1.12 times less return on investment than Barnes. But when comparing it to its historical volatility, Emerson Electric is 1.19 times less risky than Barnes. It trades about 0.08 of its potential returns per unit of risk. Barnes Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,942 in Barnes Group on August 26, 2024 and sell it today you would earn a total of 740.00 from holding Barnes Group or generate 18.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerson Electric vs. Barnes Group
Performance |
| Timeline |
| Emerson Electric |
| Barnes Group |
Emerson Electric and Barnes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Barnes
The main advantage of trading using opposite Emerson Electric and Barnes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Barnes 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 Barnes will offset losses from the drop in Barnes' long position.| Emerson Electric vs. Graco Inc | Emerson Electric vs. Franklin Electric Co | Emerson Electric vs. Flowserve | Emerson Electric vs. Donaldson |
| Barnes vs. Aquagold International | Barnes vs. Morningstar Unconstrained Allocation | Barnes vs. High Yield Municipal Fund | Barnes vs. Thrivent High Yield |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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