Correlation Between Lake Resources and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Lake Resources 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 Lake Resources and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Resources NL and Emerson Electric, you can compare the effects of market volatilities on Lake Resources 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 Lake Resources with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Emerson Electric.
Diversification Opportunities for Lake Resources and Emerson Electric
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lake and Emerson is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Lake Resources 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 Lake Resources NL 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 Lake Resources i.e., Lake Resources and Emerson Electric go up and down completely randomly.
Pair Corralation between Lake Resources and Emerson Electric
Assuming the 90 days horizon Lake Resources NL is expected to under-perform the Emerson Electric. In addition to that, Lake Resources is 5.77 times more volatile than Emerson Electric. It trades about -0.03 of its total potential returns per unit of risk. Emerson Electric is currently generating about 0.09 per unit of volatility. If you would invest 8,158 in Emerson Electric on August 31, 2024 and sell it today you would earn a total of 5,102 from holding Emerson Electric or generate 62.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Resources NL vs. Emerson Electric
Performance |
| Timeline |
| Lake Resources NL |
| Emerson Electric |
Lake Resources and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Resources and Emerson Electric
The main advantage of trading using opposite Lake Resources and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources 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.| Lake Resources vs. Liontown Resources Limited | Lake Resources vs. ATT Inc | Lake Resources vs. Merck Company | Lake Resources vs. Walt Disney |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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