Correlation Between EMERSON ELECTRIC and Fair Isaac

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

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

Diversification Opportunities for EMERSON ELECTRIC and Fair Isaac

0.94

Correlation Coefficient

EMERSON ELECTRIC  Fair Isaac

Almost no diversification

The 3 months correlation between EMERSON and Fair is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding EMERSON ELECTRIC and Fair Isaac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac has no effect on the direction of EMERSON ELECTRIC i.e., EMERSON ELECTRIC and Fair Isaac go up and down completely randomly.

Pair Corralation between EMERSON ELECTRIC and Fair Isaac

Assuming the 90 days trading horizon EMERSON ELECTRIC is expected to generate 0.51 times more return on investment than Fair Isaac. However, EMERSON ELECTRIC is 1.97 times less risky than Fair Isaac. It trades about -0.33 of its potential returns per unit of risk. Fair Isaac is currently generating about -0.22 per unit of risk. If you would invest  12,780  in EMERSON ELECTRIC on September 27, 2024 and sell it today you would lose (948.00) from holding EMERSON ELECTRIC or give up 7.42% of portfolio value over 90 days.

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

EMERSON ELECTRIC  vs.  Fair Isaac

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.

Fair Isaac

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fair Isaac reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMERSON ELECTRIC and Fair Isaac

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

The idea behind EMERSON ELECTRIC and Fair Isaac 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.