Correlation Between EMERSON ELECTRIC and Suncorp Group

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

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

Diversification Opportunities for EMERSON ELECTRIC and Suncorp Group

0.73

Correlation Coefficient

EMERSON ELECTRIC  Suncorp Group

Poor diversification

The 3 months correlation between EMERSON and Suncorp is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding EMERSON ELECTRIC and Suncorp Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncorp Group Limited 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 Suncorp Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncorp Group Limited has no effect on the direction of EMERSON ELECTRIC i.e., EMERSON ELECTRIC and Suncorp Group go up and down completely randomly.

Pair Corralation between EMERSON ELECTRIC and Suncorp Group

Assuming the 90 days trading horizon EMERSON ELECTRIC is expected to generate 0.9 times more return on investment than Suncorp Group. However, EMERSON ELECTRIC is 1.11 times less risky than Suncorp Group. It trades about 0.2 of its potential returns per unit of risk. Suncorp Group Limited is currently generating about 0.02 per unit of risk. If you would invest  9,657  in EMERSON ELECTRIC on September 30, 2024 and sell it today you would earn a total of  2,365  from holding EMERSON ELECTRIC or generate 24.49% return on investment over 90 days.

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

EMERSON ELECTRIC  vs.  Suncorp Group Limited

EMERSON ELECTRIC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMERSON ELECTRIC are ranked lower than 15 (%) 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.

Suncorp Group Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Suncorp Group Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Suncorp Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EMERSON ELECTRIC and Suncorp Group

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

The idea behind EMERSON ELECTRIC and Suncorp Group Limited 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.