Correlation Between NH Foods and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both NH Foods 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 NH Foods and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NH Foods Ltd and Emerson Electric, you can compare the effects of market volatilities on NH Foods 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 NH Foods with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH Foods and Emerson Electric.
Diversification Opportunities for NH Foods and Emerson Electric
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NIPMY and Emerson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NH Foods Ltd and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and NH Foods 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 NH Foods Ltd 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 NH Foods i.e., NH Foods and Emerson Electric go up and down completely randomly.
Pair Corralation between NH Foods and Emerson Electric
Assuming the 90 days horizon NH Foods is expected to generate 1.22 times less return on investment than Emerson Electric. But when comparing it to its historical volatility, NH Foods Ltd is 2.09 times less risky than Emerson Electric. It trades about 0.1 of its potential returns per unit of risk. Emerson Electric is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 9,078 in Emerson Electric on August 28, 2024 and sell it today you would earn a total of 4,197 from holding Emerson Electric or generate 46.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NH Foods Ltd vs. Emerson Electric
Performance |
| Timeline |
| NH Foods |
| Emerson Electric |
NH Foods and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH Foods and Emerson Electric
The main advantage of trading using opposite NH Foods and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH Foods 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.| NH Foods vs. Artisan Consumer Goods | NH Foods vs. The A2 Milk | NH Foods vs. BioAdaptives | NH Foods vs. General Mills |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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