Correlation Between Gorman Rupp and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Gorman Rupp 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 Gorman Rupp and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gorman Rupp and Emerson Electric, you can compare the effects of market volatilities on Gorman Rupp 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 Gorman Rupp with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gorman Rupp and Emerson Electric.
Diversification Opportunities for Gorman Rupp and Emerson Electric
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Gorman and Emerson is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Gorman Rupp and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Gorman Rupp 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 Gorman Rupp 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 Gorman Rupp i.e., Gorman Rupp and Emerson Electric go up and down completely randomly.
Pair Corralation between Gorman Rupp and Emerson Electric
Considering the 90-day investment horizon Gorman Rupp is expected to generate 2.14 times less return on investment than Emerson Electric. In addition to that, Gorman Rupp is 1.09 times more volatile than Emerson Electric. It trades about 0.17 of its total potential returns per unit of risk. Emerson Electric is currently generating about 0.4 per unit of volatility. 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 Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gorman Rupp vs. Emerson Electric
Performance |
| Timeline |
| Gorman Rupp |
| Emerson Electric |
Gorman Rupp and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gorman Rupp and Emerson Electric
The main advantage of trading using opposite Gorman Rupp and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gorman Rupp 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.| Gorman Rupp vs. Standex International | Gorman Rupp vs. Franklin Electric Co | Gorman Rupp vs. Omega Flex | Gorman Rupp vs. China Yuchai International |
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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