Correlation Between EMERSON ELECTRIC and Blackline

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

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

Diversification Opportunities for EMERSON ELECTRIC and Blackline

0.91

Correlation Coefficient

EMERSON ELECTRIC  Blackline

Almost no diversification

The 3 months correlation between EMERSON and Blackline is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding EMERSON ELECTRIC and Blackline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackline and EMERSON ELECTRIC 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 EMERSON ELECTRIC are associated (or correlated) with Blackline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackline has no effect on the direction of EMERSON ELECTRIC i.e., EMERSON ELECTRIC and Blackline go up and down completely randomly.

Pair Corralation between EMERSON ELECTRIC and Blackline

Assuming the 90 days trading horizon EMERSON ELECTRIC is expected to under-perform the Blackline. But the stock apears to be less risky and, when comparing its historical volatility, EMERSON ELECTRIC is 1.4 times less risky than Blackline. The stock trades about -0.33 of its potential returns per unit of risk. The Blackline is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,950  in Blackline on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Blackline or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

EMERSON ELECTRIC  vs.  Blackline

EMERSON ELECTRIC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMERSON ELECTRIC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EMERSON ELECTRIC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Blackline

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackline are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Blackline reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMERSON ELECTRIC and Blackline

The main advantage of trading using opposite EMERSON ELECTRIC and Blackline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMERSON ELECTRIC position performs unexpectedly, Blackline 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 Blackline will offset losses from the drop in Blackline's long position.

The idea behind EMERSON ELECTRIC and Blackline 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.