Correlation Between Emerson Electric and Atlas Copco

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

By analyzing existing cross correlation between Emerson Electric and Atlas Copco AB, you can compare the effects of market volatilities on Emerson Electric and Atlas Copco 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 Atlas Copco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Atlas Copco.

Diversification Opportunities for Emerson Electric and Atlas Copco

-0.23

Correlation Coefficient

Emerson Electric  Atlas Copco

Very good diversification

The 3 months correlation between Emerson and Atlas is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Atlas Copco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco AB 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 Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco AB has no effect on the direction of Emerson Electric i.e., Emerson Electric and Atlas Copco go up and down completely randomly.

Pair Corralation between Emerson Electric and Atlas Copco

Considering the 90-day investment horizon Emerson Electric is expected to under-perform the Atlas Copco. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Electric is 1.2 times less risky than Atlas Copco. The stock trades about -0.09 of its potential returns per unit of risk. The Atlas Copco AB is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,530  in Atlas Copco AB on December 29, 2024 and sell it today you would earn a total of  134.00  from holding Atlas Copco AB or generate 8.76% return on investment over 90 days.

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

Emerson Electric  vs.  Atlas Copco AB

Emerson Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Emerson Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Atlas Copco AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking signals, Atlas Copco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Emerson Electric and Atlas Copco

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

The idea behind Emerson Electric and Atlas Copco AB 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.