Correlation Between Emerson Electric and Eastern
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Eastern 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 Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Eastern Co, you can compare the effects of market volatilities on Emerson Electric and Eastern 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 Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Eastern.
Diversification Opportunities for Emerson Electric and Eastern
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Emerson and Eastern is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern 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 Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Emerson Electric i.e., Emerson Electric and Eastern go up and down completely randomly.
Pair Corralation between Emerson Electric and Eastern
Considering the 90-day investment horizon Emerson Electric is expected to generate 0.88 times more return on investment than Eastern. However, Emerson Electric is 1.14 times less risky than Eastern. It trades about 0.41 of its potential returns per unit of risk. Eastern Co is currently generating about -0.18 per unit of risk. If you would invest 10,822 in Emerson Electric on August 29, 2024 and sell it today you would earn a total of 2,478 from holding Emerson Electric or generate 22.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerson Electric vs. Eastern Co
Performance |
| Timeline |
| Emerson Electric |
| Eastern |
Emerson Electric and Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Eastern
The main advantage of trading using opposite Emerson Electric and Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Eastern 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 Eastern will offset losses from the drop in Eastern's long position.| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. AB SKF | Eastern vs. Kennametal |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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