Correlation Between Broadleaf and Emerson Electric

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

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

Diversification Opportunities for Broadleaf and Emerson Electric

0.0

Correlation Coefficient

Broadleaf  Emerson Electric

Pay attention - limited upside

The 3 months correlation between Broadleaf and Emerson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Broadleaf Co and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Broadleaf 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 Broadleaf 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 Broadleaf i.e., Broadleaf and Emerson Electric go up and down completely randomly.

Pair Corralation between Broadleaf and Emerson Electric

If you would invest  10,892  in Emerson Electric on September 29, 2024 and sell it today you would earn a total of  1,679  from holding Emerson Electric or generate 15.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Broadleaf Co  vs.  Emerson Electric

Broadleaf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadleaf Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Broadleaf 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

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Emerson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadleaf and Emerson Electric

The main advantage of trading using opposite Broadleaf and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadleaf 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 Broadleaf Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.