Correlation Between Emerson Electric and NGK Insulators
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and NGK Insulators 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 NGK Insulators into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and NGK Insulators, you can compare the effects of market volatilities on Emerson Electric and NGK Insulators 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 NGK Insulators. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and NGK Insulators.
Diversification Opportunities for Emerson Electric and NGK Insulators
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerson and NGK is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and NGK Insulators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGK Insulators 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 NGK Insulators. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGK Insulators has no effect on the direction of Emerson Electric i.e., Emerson Electric and NGK Insulators go up and down completely randomly.
Pair Corralation between Emerson Electric and NGK Insulators
If you would invest 10,936 in Emerson Electric on September 5, 2024 and sell it today you would earn a total of 2,404 from holding Emerson Electric or generate 21.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Emerson Electric vs. NGK Insulators
Performance |
| Timeline |
| Emerson Electric |
| NGK Insulators |
Emerson Electric and NGK Insulators Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and NGK Insulators
The main advantage of trading using opposite Emerson Electric and NGK Insulators positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, NGK Insulators 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 NGK Insulators will offset losses from the drop in NGK Insulators' long position.| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
| NGK Insulators vs. Dear Cashmere Holding | NGK Insulators vs. Goff Corp | NGK Insulators vs. Wialan Technologies | NGK Insulators vs. Cgrowth Capital |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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