Correlation Between Coca Cola and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Coca Cola 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 Coca Cola and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Coca Cola and Emerson Electric, you can compare the effects of market volatilities on Coca Cola 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 Coca Cola with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Emerson Electric.
Diversification Opportunities for Coca Cola and Emerson Electric
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Coca and Emerson is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Coca Cola 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 The Coca Cola 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 Coca Cola i.e., Coca Cola and Emerson Electric go up and down completely randomly.
Pair Corralation between Coca Cola and Emerson Electric
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 40.08 times less return on investment than Emerson Electric. But when comparing it to its historical volatility, The Coca Cola is 1.91 times less risky than Emerson Electric. It trades about 0.01 of its potential returns per unit of risk. Emerson Electric is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 12,393 in Emerson Electric on October 23, 2024 and sell it today you would earn a total of 555.00 from holding Emerson Electric or generate 4.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Emerson Electric
Performance |
| Timeline |
| Coca Cola |
| Emerson Electric |
Coca Cola and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Emerson Electric
The main advantage of trading using opposite Coca Cola and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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.| Coca Cola vs. Celsius Holdings | Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Keurig Dr Pepper |
| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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