Correlation Between Emerson Electric and Ballard Power

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Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Ballard Power 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 Ballard Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Ballard Power Systems, you can compare the effects of market volatilities on Emerson Electric and Ballard Power 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 Ballard Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Ballard Power.

Diversification Opportunities for Emerson Electric and Ballard Power

EmersonBallardDiversified AwayEmersonBallardDiversified Away100%
-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between Emerson and Ballard is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Ballard Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballard Power Systems 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 Ballard Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballard Power Systems has no effect on the direction of Emerson Electric i.e., Emerson Electric and Ballard Power go up and down completely randomly.

Pair Corralation between Emerson Electric and Ballard Power

Considering the 90-day investment horizon Emerson Electric is expected to under-perform the Ballard Power. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Electric is 2.57 times less risky than Ballard Power. The stock trades about -0.22 of its potential returns per unit of risk. The Ballard Power Systems is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  146.00  in Ballard Power Systems on November 25, 2024 and sell it today you would lose (6.00) from holding Ballard Power Systems or give up 4.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Emerson Electric  vs.  Ballard Power Systems

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 01020304050
JavaScript chart by amCharts 3.21.15EMR BLDP
       Timeline  
Emerson Electric 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Emerson Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb120125130135
Ballard Power Systems 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ballard Power Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Ballard Power is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1.31.41.51.61.71.81.92

Emerson Electric and Ballard Power Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.26-1.71-1.16-0.61-0.06580.461.011.562.112.66 0.050.100.150.20
JavaScript chart by amCharts 3.21.15EMR BLDP
       Returns  

Pair Trading with Emerson Electric and Ballard Power

The main advantage of trading using opposite Emerson Electric and Ballard Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Ballard Power 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 Ballard Power will offset losses from the drop in Ballard Power's long position.
The idea behind Emerson Electric and Ballard Power Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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