Correlation Between Emerson Electric and PacifiCorp
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and PacifiCorp 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 PacifiCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and PacifiCorp, you can compare the effects of market volatilities on Emerson Electric and PacifiCorp 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 PacifiCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and PacifiCorp.
Diversification Opportunities for Emerson Electric and PacifiCorp
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerson and PacifiCorp is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp 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 PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Emerson Electric i.e., Emerson Electric and PacifiCorp go up and down completely randomly.
Pair Corralation between Emerson Electric and PacifiCorp
Considering the 90-day investment horizon Emerson Electric is expected to generate 3.55 times less return on investment than PacifiCorp. In addition to that, Emerson Electric is 1.61 times more volatile than PacifiCorp. It trades about 0.02 of its total potential returns per unit of risk. PacifiCorp is currently generating about 0.13 per unit of volatility. If you would invest 15,100 in PacifiCorp on October 21, 2024 and sell it today you would earn a total of 245.00 from holding PacifiCorp or generate 1.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Emerson Electric vs. PacifiCorp
Performance |
Timeline |
Emerson Electric |
PacifiCorp |
Emerson Electric and PacifiCorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Emerson Electric and PacifiCorp
The main advantage of trading using opposite Emerson Electric and PacifiCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, PacifiCorp 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 PacifiCorp will offset losses from the drop in PacifiCorp's long position.Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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