Correlation Between Emerson Electric and Kone Oyj
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Kone Oyj 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 Kone Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Kone Oyj ADR, you can compare the effects of market volatilities on Emerson Electric and Kone Oyj 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 Kone Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Kone Oyj.
Diversification Opportunities for Emerson Electric and Kone Oyj
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Emerson and Kone is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Kone Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kone Oyj ADR 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 Kone Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kone Oyj ADR has no effect on the direction of Emerson Electric i.e., Emerson Electric and Kone Oyj go up and down completely randomly.
Pair Corralation between Emerson Electric and Kone Oyj
Considering the 90-day investment horizon Emerson Electric is expected to generate 1.5 times more return on investment than Kone Oyj. However, Emerson Electric is 1.5 times more volatile than Kone Oyj ADR. It trades about 0.41 of its potential returns per unit of risk. Kone Oyj ADR is currently generating about -0.3 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. Kone Oyj ADR
Performance |
| Timeline |
| Emerson Electric |
| Kone Oyj ADR |
Emerson Electric and Kone Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Kone Oyj
The main advantage of trading using opposite Emerson Electric and Kone Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Kone Oyj 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 Kone Oyj will offset losses from the drop in Kone Oyj's long position.| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
| Kone Oyj vs. Parker Hannifin | Kone Oyj vs. Eaton PLC | Kone Oyj vs. Dover | Kone Oyj vs. Illinois Tool Works |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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