Correlation Between Flowserve and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Flowserve and Emerson Electric 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 Flowserve and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flowserve and Emerson Electric, you can compare the effects of market volatilities on Flowserve and Emerson Electric 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 Flowserve with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flowserve and Emerson Electric.
Diversification Opportunities for Flowserve and Emerson Electric
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Flowserve and Emerson is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Flowserve and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Flowserve 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 Flowserve are associated (or correlated) with Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Flowserve i.e., Flowserve and Emerson Electric go up and down completely randomly.
Pair Corralation between Flowserve and Emerson Electric
Considering the 90-day investment horizon Flowserve is expected to generate 1.02 times more return on investment than Emerson Electric. However, Flowserve is 1.02 times more volatile than Emerson Electric. It trades about 0.13 of its potential returns per unit of risk. Emerson Electric is currently generating about 0.08 per unit of risk. If you would invest 4,177 in Flowserve on August 27, 2024 and sell it today you would earn a total of 1,923 from holding Flowserve or generate 46.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flowserve vs. Emerson Electric
Performance |
| Timeline |
| Flowserve |
| Emerson Electric |
Flowserve and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flowserve and Emerson Electric
The main advantage of trading using opposite Flowserve and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flowserve position performs unexpectedly, Emerson Electric 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 Emerson Electric will offset losses from the drop in Emerson Electric's long position.| Flowserve vs. Aquagold International | Flowserve vs. Morningstar Unconstrained Allocation | Flowserve vs. High Yield Municipal Fund | Flowserve vs. Thrivent High Yield |
| Emerson Electric vs. Graco Inc | Emerson Electric vs. Franklin Electric Co | Emerson Electric vs. Flowserve | Emerson Electric vs. Donaldson |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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