Correlation Between Emerson Electric and NH Foods
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and NH Foods 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 NH Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and NH Foods Ltd, you can compare the effects of market volatilities on Emerson Electric and NH Foods 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 NH Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and NH Foods.
Diversification Opportunities for Emerson Electric and NH Foods
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Emerson and NIPMY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and NH Foods Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods 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 NH Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Foods has no effect on the direction of Emerson Electric i.e., Emerson Electric and NH Foods go up and down completely randomly.
Pair Corralation between Emerson Electric and NH Foods
Considering the 90-day investment horizon Emerson Electric is expected to generate 2.08 times more return on investment than NH Foods. However, Emerson Electric is 2.08 times more volatile than NH Foods Ltd. It trades about 0.05 of its potential returns per unit of risk. NH Foods Ltd is currently generating about 0.1 per unit of risk. If you would invest 9,120 in Emerson Electric on August 24, 2024 and sell it today you would earn a total of 3,887 from holding Emerson Electric or generate 42.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerson Electric vs. NH Foods Ltd
Performance |
| Timeline |
| Emerson Electric |
| NH Foods |
Emerson Electric and NH Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and NH Foods
The main advantage of trading using opposite Emerson Electric and NH Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, NH Foods 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 NH Foods will offset losses from the drop in NH Foods' long position.| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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