Correlation Between Emerson Electric and MKDWELL Tech

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

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

Diversification Opportunities for Emerson Electric and MKDWELL Tech

0.66

Correlation Coefficient

Emerson Electric  MKDWELL Tech

Poor diversification

The 3 months correlation between Emerson and MKDWELL is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and MKDWELL Tech Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKDWELL Tech Warrants 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 MKDWELL Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKDWELL Tech Warrants has no effect on the direction of Emerson Electric i.e., Emerson Electric and MKDWELL Tech go up and down completely randomly.

Pair Corralation between Emerson Electric and MKDWELL Tech

Considering the 90-day investment horizon Emerson Electric is expected to under-perform the MKDWELL Tech. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Electric is 10.47 times less risky than MKDWELL Tech. The stock trades about -0.09 of its potential returns per unit of risk. The MKDWELL Tech Warrants is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.56  in MKDWELL Tech Warrants on December 29, 2024 and sell it today you would lose (0.12) from holding MKDWELL Tech Warrants or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	62.3%
Values	Daily Returns

Emerson Electric  vs.  MKDWELL Tech Warrants

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.

MKDWELL Tech Warrants

Risk-Adjusted Performance

Weak

Over the last 90 days MKDWELL Tech Warrants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, MKDWELL Tech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerson Electric and MKDWELL Tech

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

The idea behind Emerson Electric and MKDWELL Tech Warrants 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.