Correlation Between Emerson Electric and Dividend

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

By analyzing existing cross correlation between Emerson Electric and Dividend 15 Split, you can compare the effects of market volatilities on Emerson Electric and Dividend 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 Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Dividend.

Diversification Opportunities for Emerson Electric and Dividend

0.7

Correlation Coefficient

Emerson Electric  Dividend

Poor diversification

The 3 months correlation between Emerson and Dividend is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Dividend 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend 15 Split 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 Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend 15 Split has no effect on the direction of Emerson Electric i.e., Emerson Electric and Dividend go up and down completely randomly.

Pair Corralation between Emerson Electric and Dividend

Considering the 90-day investment horizon Emerson Electric is expected to generate 1.76 times more return on investment than Dividend. However, Emerson Electric is 1.76 times more volatile than Dividend 15 Split. It trades about 0.08 of its potential returns per unit of risk. Dividend 15 Split is currently generating about 0.12 per unit of risk. If you would invest  9,153  in Emerson Electric on October 9, 2024 and sell it today you would earn a total of  2,915  from holding Emerson Electric or generate 31.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Emerson Electric  vs.  Dividend 15 Split

Emerson Electric

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Emerson Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dividend 15 Split

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Dividend may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Emerson Electric and Dividend

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

The idea behind Emerson Electric and Dividend 15 Split 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 Transaction History module to view history of all your transactions and understand their impact on performance.