Correlation Between Emerson Electric and Enpro Industries
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Enpro Industries 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 Enpro Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Enpro Industries, you can compare the effects of market volatilities on Emerson Electric and Enpro Industries 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 Enpro Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Enpro Industries.
Diversification Opportunities for Emerson Electric and Enpro Industries
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Emerson and Enpro is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Enpro Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enpro Industries 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 Enpro Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enpro Industries has no effect on the direction of Emerson Electric i.e., Emerson Electric and Enpro Industries go up and down completely randomly.
Pair Corralation between Emerson Electric and Enpro Industries
Considering the 90-day investment horizon Emerson Electric is expected to generate 0.76 times more return on investment than Enpro Industries. However, Emerson Electric is 1.31 times less risky than Enpro Industries. It trades about 0.08 of its potential returns per unit of risk. Enpro Industries is currently generating about 0.06 per unit of risk. If you would invest 9,153 in Emerson Electric on November 9, 2024 and sell it today you would earn a total of 3,595 from holding Emerson Electric or generate 39.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerson Electric vs. Enpro Industries
Performance |
| Timeline |
| Emerson Electric |
| Enpro Industries |
Emerson Electric and Enpro Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Enpro Industries
The main advantage of trading using opposite Emerson Electric and Enpro Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Enpro Industries 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 Enpro Industries will offset losses from the drop in Enpro Industries' long position.| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
| Enpro Industries vs. Helios Technologies | Enpro Industries vs. Omega Flex | Enpro Industries vs. Luxfer Holdings PLC | Enpro Industries vs. Hurco Companies |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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