Correlation Between Weichai Power and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Weichai Power 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 Weichai Power and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weichai Power Co and Emerson Electric, you can compare the effects of market volatilities on Weichai Power 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 Weichai Power with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weichai Power and Emerson Electric.
Diversification Opportunities for Weichai Power and Emerson Electric
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Weichai and Emerson is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Weichai Power Co and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Weichai Power 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 Weichai Power Co 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 Weichai Power i.e., Weichai Power and Emerson Electric go up and down completely randomly.
Pair Corralation between Weichai Power and Emerson Electric
If you would invest 10,857 in Emerson Electric on August 31, 2024 and sell it today you would earn a total of 2,402 from holding Emerson Electric or generate 22.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Weichai Power Co vs. Emerson Electric
Performance |
| Timeline |
| Weichai Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Emerson Electric |
Weichai Power and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weichai Power and Emerson Electric
The main advantage of trading using opposite Weichai Power and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weichai Power 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.| Weichai Power vs. Xinjiang Goldwind Science | Weichai Power vs. Shanghai Electric Group | Weichai Power vs. American Superconductor | Weichai Power vs. Cummins |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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