Correlation Between Emerson Electric and Helios Technologies

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

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

Diversification Opportunities for Emerson Electric and Helios Technologies

0.59

Correlation Coefficient

Emerson Electric  Helios Technologies

Very weak diversification

The 3 months correlation between Emerson and Helios is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Helios Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helios Technologies 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 Helios Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helios Technologies has no effect on the direction of Emerson Electric i.e., Emerson Electric and Helios Technologies go up and down completely randomly.

Pair Corralation between Emerson Electric and Helios Technologies

Considering the 90-day investment horizon Emerson Electric is expected to generate 0.82 times more return on investment than Helios Technologies. However, Emerson Electric is 1.22 times less risky than Helios Technologies. It trades about -0.27 of its potential returns per unit of risk. Helios Technologies is currently generating about -0.49 per unit of risk. If you would invest  13,315  in Emerson Electric on October 6, 2024 and sell it today you would lose (971.00) from holding Emerson Electric or give up 7.29% of portfolio value over 90 days.

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

Emerson Electric  vs.  Helios Technologies

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.

Helios Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Helios Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Helios Technologies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Emerson Electric and Helios Technologies

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

The idea behind Emerson Electric and Helios Technologies 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.