Correlation Between Regal Beloit and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Regal Beloit 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 Regal Beloit and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regal Beloit and Emerson Electric, you can compare the effects of market volatilities on Regal Beloit 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 Regal Beloit with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regal Beloit and Emerson Electric.
Diversification Opportunities for Regal Beloit and Emerson Electric
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Regal and Emerson is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Regal Beloit and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Regal Beloit 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 Regal Beloit 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 Regal Beloit i.e., Regal Beloit and Emerson Electric go up and down completely randomly.
Pair Corralation between Regal Beloit and Emerson Electric
Considering the 90-day investment horizon Regal Beloit is expected to generate 1.33 times more return on investment than Emerson Electric. However, Regal Beloit is 1.33 times more volatile than Emerson Electric. It trades about 0.08 of its potential returns per unit of risk. Emerson Electric is currently generating about 0.11 per unit of risk. If you would invest 13,948 in Regal Beloit on September 2, 2024 and sell it today you would earn a total of 3,323 from holding Regal Beloit or generate 23.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regal Beloit vs. Emerson Electric
Performance |
| Timeline |
| Regal Beloit |
| Emerson Electric |
Regal Beloit and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regal Beloit and Emerson Electric
The main advantage of trading using opposite Regal Beloit and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regal Beloit 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.| Regal Beloit vs. IDEX Corporation | Regal Beloit vs. Watts Water Technologies | Regal Beloit vs. Donaldson | Regal Beloit vs. Gorman Rupp |
| Emerson Electric vs. Illinois Tool Works | Emerson Electric vs. Dover | Emerson Electric vs. Cummins | Emerson Electric vs. Parker Hannifin |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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