Correlation Between Vanguard World and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Vanguard World 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 Vanguard World and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard World and Emerson Electric Co, you can compare the effects of market volatilities on Vanguard World 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 Vanguard World with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard World and Emerson Electric.
Diversification Opportunities for Vanguard World and Emerson Electric
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Emerson is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and Emerson Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Vanguard World 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 Vanguard World 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 Vanguard World i.e., Vanguard World and Emerson Electric go up and down completely randomly.
Pair Corralation between Vanguard World and Emerson Electric
Assuming the 90 days trading horizon Vanguard World is expected to generate 3.9 times less return on investment than Emerson Electric. But when comparing it to its historical volatility, Vanguard World is 7.25 times less risky than Emerson Electric. It trades about 0.4 of its potential returns per unit of risk. Emerson Electric Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 204,200 in Emerson Electric Co on October 31, 2024 and sell it today you would earn a total of 60,451 from holding Emerson Electric Co or generate 29.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard World vs. Emerson Electric Co
Performance |
| Timeline |
| Vanguard World |
| Emerson Electric |
Vanguard World and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard World and Emerson Electric
The main advantage of trading using opposite Vanguard World and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard World 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.| Vanguard World vs. Vanguard Funds Public | Vanguard World vs. Vanguard Specialized Funds | Vanguard World vs. Vanguard World | Vanguard World vs. Vanguard Index Funds |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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