Correlation Between Abpro Holdings and Emerson Electric

Can any of the company-specific risk be diversified away by investing in both Abpro Holdings 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 Abpro Holdings and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Abpro Holdings and Emerson Electric, you can compare the effects of market volatilities on Abpro Holdings 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 Abpro Holdings with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abpro Holdings and Emerson Electric.

Diversification Opportunities for Abpro Holdings and Emerson Electric

-0.55

Correlation Coefficient

Abpro Holdings  Emerson Electric

Excellent diversification

The 3 months correlation between Abpro and Emerson is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Abpro Holdings and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Abpro Holdings 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 Abpro Holdings 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 Abpro Holdings i.e., Abpro Holdings and Emerson Electric go up and down completely randomly.

Pair Corralation between Abpro Holdings and Emerson Electric

Assuming the 90 days horizon Abpro Holdings is expected to generate 19.86 times more return on investment than Emerson Electric. However, Abpro Holdings is 19.86 times more volatile than Emerson Electric. It trades about 0.21 of its potential returns per unit of risk. Emerson Electric is currently generating about 0.08 per unit of risk. If you would invest  4.00  in Abpro Holdings on October 6, 2024 and sell it today you would earn a total of  4.65  from holding Abpro Holdings or generate 116.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.73%
Values	Daily Returns

Abpro Holdings  vs.  Emerson Electric

Abpro Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Abpro Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Abpro Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Emerson Electric

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Emerson Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Abpro Holdings and Emerson Electric

The main advantage of trading using opposite Abpro Holdings and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abpro Holdings 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 Abpro Holdings 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.