Correlation Between Emerson Electric and Weichai Power
Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Weichai Power 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 Weichai Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Weichai Power Co, you can compare the effects of market volatilities on Emerson Electric and Weichai Power 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 Weichai Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Weichai Power.
Diversification Opportunities for Emerson Electric and Weichai Power
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Emerson and Weichai is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Weichai Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weichai Power 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 Weichai Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weichai Power has no effect on the direction of Emerson Electric i.e., Emerson Electric and Weichai Power go up and down completely randomly.
Pair Corralation between Emerson Electric and Weichai Power
If you would invest 10,857 in Emerson Electric on August 31, 2024 and sell it today you would earn a total of 2,402 from holding Emerson Electric or generate 22.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Emerson Electric vs. Weichai Power Co
Performance |
| Timeline |
| Emerson Electric |
| Weichai Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Emerson Electric and Weichai Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Weichai Power
The main advantage of trading using opposite Emerson Electric and Weichai Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Weichai Power 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 Weichai Power will offset losses from the drop in Weichai Power'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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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