Correlation Between Aldel Financial and Emerson Electric

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

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

Diversification Opportunities for Aldel Financial and Emerson Electric

-0.06

Correlation Coefficient

Aldel Financial  Emerson Electric

Good diversification

The 3 months correlation between Aldel and Emerson is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Aldel Financial 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 Aldel Financial II 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 Aldel Financial i.e., Aldel Financial and Emerson Electric go up and down completely randomly.

Pair Corralation between Aldel Financial and Emerson Electric

Given the investment horizon of 90 days Aldel Financial II is expected to generate 0.09 times more return on investment than Emerson Electric. However, Aldel Financial II is 11.1 times less risky than Emerson Electric. It trades about 0.15 of its potential returns per unit of risk. Emerson Electric is currently generating about -0.28 per unit of risk. If you would invest  990.00  in Aldel Financial II on October 10, 2024 and sell it today you would earn a total of  3.00  from holding Aldel Financial II or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.0%
Values	Daily Returns

Aldel Financial II  vs.  Emerson Electric

Aldel Financial II

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Aldel Financial and Emerson Electric

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

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.