Correlation Between Emerson Electric and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Sandvik AB 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 Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Sandvik AB ADR, you can compare the effects of market volatilities on Emerson Electric and Sandvik AB 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 Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Sandvik AB.
Diversification Opportunities for Emerson Electric and Sandvik AB
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Emerson and Sandvik is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Sandvik AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB 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 Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB ADR has no effect on the direction of Emerson Electric i.e., Emerson Electric and Sandvik AB go up and down completely randomly.
Pair Corralation between Emerson Electric and Sandvik AB
Considering the 90-day investment horizon Emerson Electric is expected to generate 1.0 times more return on investment than Sandvik AB. However, Emerson Electric is 1.0 times more volatile than Sandvik AB ADR. It trades about 0.22 of its potential returns per unit of risk. Sandvik AB ADR is currently generating about -0.12 per unit of risk. If you would invest 10,366 in Emerson Electric on August 29, 2024 and sell it today you would earn a total of 2,893 from holding Emerson Electric or generate 27.91% 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. Sandvik AB ADR
Performance |
| Timeline |
| Emerson Electric |
| Sandvik AB ADR |
Emerson Electric and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Sandvik AB
The main advantage of trading using opposite Emerson Electric and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
| Sandvik AB vs. Parker Hannifin | Sandvik AB vs. Eaton PLC | Sandvik AB vs. Dover | Sandvik AB 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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