Correlation Between Taylor Devices and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Taylor Devices 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 Taylor Devices and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taylor Devices and Emerson Electric, you can compare the effects of market volatilities on Taylor Devices 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 Taylor Devices with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taylor Devices and Emerson Electric.
Diversification Opportunities for Taylor Devices and Emerson Electric
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taylor and Emerson is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Taylor Devices and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Taylor Devices 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 Taylor Devices 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 Taylor Devices i.e., Taylor Devices and Emerson Electric go up and down completely randomly.
Pair Corralation between Taylor Devices and Emerson Electric
Given the investment horizon of 90 days Taylor Devices is expected to generate 1.53 times less return on investment than Emerson Electric. In addition to that, Taylor Devices is 2.51 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 0.11 per unit of volatility. If you would invest 10,590 in Emerson Electric on September 2, 2024 and sell it today you would earn a total of 2,670 from holding Emerson Electric or generate 25.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taylor Devices vs. Emerson Electric
Performance |
| Timeline |
| Taylor Devices |
| Emerson Electric |
Taylor Devices and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taylor Devices and Emerson Electric
The main advantage of trading using opposite Taylor Devices and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taylor Devices 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 Taylor Devices 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. 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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