Correlation Between Emerson Electric and PAVmed Series

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

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

Diversification Opportunities for Emerson Electric and PAVmed Series

0.58

Correlation Coefficient

Emerson Electric  PAVmed Series

Very weak diversification

The 3 months correlation between Emerson and PAVmed is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and PAVmed Series Z in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAVmed Series Z 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 PAVmed Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAVmed Series Z has no effect on the direction of Emerson Electric i.e., Emerson Electric and PAVmed Series go up and down completely randomly.

Pair Corralation between Emerson Electric and PAVmed Series

Considering the 90-day investment horizon Emerson Electric is expected to under-perform the PAVmed Series. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Electric is 19.38 times less risky than PAVmed Series. The stock trades about -0.08 of its potential returns per unit of risk. The PAVmed Series Z is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.50  in PAVmed Series Z on December 26, 2024 and sell it today you would lose (0.97) from holding PAVmed Series Z or give up 64.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.33%
Values	Daily Returns

Emerson Electric  vs.  PAVmed Series Z

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.

PAVmed Series Z

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PAVmed Series Z are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting primary indicators, PAVmed Series showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerson Electric and PAVmed Series

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

The idea behind Emerson Electric and PAVmed Series Z 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.