Correlation Between NGK Insulators and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both NGK Insulators 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 NGK Insulators and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NGK Insulators and Emerson Electric, you can compare the effects of market volatilities on NGK Insulators 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 NGK Insulators with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGK Insulators and Emerson Electric.
Diversification Opportunities for NGK Insulators and Emerson Electric
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NGK and Emerson is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding NGK Insulators and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and NGK Insulators 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 NGK Insulators 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 NGK Insulators i.e., NGK Insulators and Emerson Electric go up and down completely randomly.
Pair Corralation between NGK Insulators and Emerson Electric
Assuming the 90 days horizon NGK Insulators is expected to under-perform the Emerson Electric. In addition to that, NGK Insulators is 1.77 times more volatile than Emerson Electric. It trades about -0.21 of its total potential returns per unit of risk. Emerson Electric is currently generating about 0.25 per unit of volatility. If you would invest 12,218 in Emerson Electric on November 2, 2024 and sell it today you would earn a total of 842.00 from holding Emerson Electric or generate 6.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
NGK Insulators vs. Emerson Electric
Performance |
| Timeline |
| NGK Insulators |
| Emerson Electric |
NGK Insulators and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NGK Insulators and Emerson Electric
The main advantage of trading using opposite NGK Insulators and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGK Insulators 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.| NGK Insulators vs. IPG Photonics | NGK Insulators vs. Integrated Media Technology | NGK Insulators vs. Scandinavian Tobacco Group | NGK Insulators vs. Allient |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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