Correlation Between Emerson Electric and Big Tree
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Big Tree 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 Big Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Big Tree Cloud, you can compare the effects of market volatilities on Emerson Electric and Big Tree 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 Big Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Big Tree.
Diversification Opportunities for Emerson Electric and Big Tree
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Emerson and Big is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Big Tree Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Tree Cloud 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 Big Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Tree Cloud has no effect on the direction of Emerson Electric i.e., Emerson Electric and Big Tree go up and down completely randomly.
Pair Corralation between Emerson Electric and Big Tree
Considering the 90-day investment horizon Emerson Electric is expected to generate 0.14 times more return on investment than Big Tree. However, Emerson Electric is 7.19 times less risky than Big Tree. It trades about 0.24 of its potential returns per unit of risk. Big Tree Cloud is currently generating about 0.0 per unit of risk. If you would invest 10,106 in Emerson Electric on September 12, 2024 and sell it today you would earn a total of 2,983 from holding Emerson Electric or generate 29.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Emerson Electric vs. Big Tree Cloud
Performance |
| Timeline |
| Emerson Electric |
| Big Tree Cloud |
Emerson Electric and Big Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Big Tree
The main advantage of trading using opposite Emerson Electric and Big Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Big Tree 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 Big Tree will offset losses from the drop in Big Tree's long position.| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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