Correlation Between Rivian Automotive and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Rivian Automotive 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 Rivian Automotive and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rivian Automotive and Emerson Electric, you can compare the effects of market volatilities on Rivian Automotive 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 Rivian Automotive with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rivian Automotive and Emerson Electric.
Diversification Opportunities for Rivian Automotive and Emerson Electric
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Rivian and Emerson is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Rivian Automotive 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 Rivian Automotive 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 Rivian Automotive i.e., Rivian Automotive and Emerson Electric go up and down completely randomly.
Pair Corralation between Rivian Automotive and Emerson Electric
Given the investment horizon of 90 days Rivian Automotive is expected to generate 3.18 times less return on investment than Emerson Electric. In addition to that, Rivian Automotive is 2.94 times more volatile than Emerson Electric. It trades about 0.01 of its total potential returns per unit of risk. Emerson Electric is currently generating about 0.1 per unit of volatility. If you would invest 8,715 in Emerson Electric on September 14, 2024 and sell it today you would earn a total of 4,305 from holding Emerson Electric or generate 49.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rivian Automotive vs. Emerson Electric
Performance |
| Timeline |
| Rivian Automotive |
| Emerson Electric |
Rivian Automotive and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rivian Automotive and Emerson Electric
The main advantage of trading using opposite Rivian Automotive and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rivian Automotive 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.The idea behind Rivian Automotive and Emerson Electric pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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