Correlation Between Emerson Electric and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Scandinavian Tobacco 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 Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Emerson Electric and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Scandinavian Tobacco.
Diversification Opportunities for Emerson Electric and Scandinavian Tobacco
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Emerson and Scandinavian is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Emerson Electric i.e., Emerson Electric and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Emerson Electric and Scandinavian Tobacco
Considering the 90-day investment horizon Emerson Electric is expected to generate 1.86 times more return on investment than Scandinavian Tobacco. However, Emerson Electric is 1.86 times more volatile than Scandinavian Tobacco Group. It trades about 0.1 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.01 per unit of risk. If you would invest 10,549 in Emerson Electric on September 12, 2024 and sell it today you would earn a total of 2,366 from holding Emerson Electric or generate 22.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Emerson Electric vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Emerson Electric |
| Scandinavian Tobacco |
Emerson Electric and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Scandinavian Tobacco
The main advantage of trading using opposite Emerson Electric and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's long position.| Emerson Electric vs. Victory Integrity Smallmid Cap | Emerson Electric vs. Hilton Worldwide Holdings | Emerson Electric vs. NVIDIA | Emerson Electric vs. JPMorgan Chase Co |
| Scandinavian Tobacco vs. Imperial Brands PLC | Scandinavian Tobacco vs. RLX Technology | Scandinavian Tobacco vs. British American Tobacco | Scandinavian Tobacco vs. Turning Point Brands |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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