Correlation Between Emerson Electric and SNDL

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

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

Diversification Opportunities for Emerson Electric and SNDL

-0.54

Correlation Coefficient

Emerson Electric  SNDL

Excellent diversification

The 3 months correlation between Emerson and SNDL is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Emerson Electric i.e., Emerson Electric and SNDL go up and down completely randomly.

Pair Corralation between Emerson Electric and SNDL

Considering the 90-day investment horizon Emerson Electric is expected to generate 1.08 times less return on investment than SNDL. But when comparing it to its historical volatility, Emerson Electric is 2.59 times less risky than SNDL. It trades about 0.09 of its potential returns per unit of risk. SNDL Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  146.00  in SNDL Inc on October 21, 2024 and sell it today you would earn a total of  32.00  from holding SNDL Inc or generate 21.92% return on investment over 90 days.

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

Emerson Electric  vs.  SNDL Inc

Emerson Electric

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Emerson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Emerson Electric and SNDL

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

The idea behind Emerson Electric and SNDL Inc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.