Correlation Between Emerson Electric and Torex Gold

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

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

Diversification Opportunities for Emerson Electric and Torex Gold

-0.18

Correlation Coefficient

Emerson Electric  Torex Gold

Good diversification

The 3 months correlation between Emerson and Torex is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Torex Gold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torex Gold Resources 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 Torex Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torex Gold Resources has no effect on the direction of Emerson Electric i.e., Emerson Electric and Torex Gold go up and down completely randomly.

Pair Corralation between Emerson Electric and Torex Gold

Considering the 90-day investment horizon Emerson Electric is expected to under-perform the Torex Gold. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Electric is 1.71 times less risky than Torex Gold. The stock trades about -0.24 of its potential returns per unit of risk. The Torex Gold Resources is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  2,095  in Torex Gold Resources on October 9, 2024 and sell it today you would lose (123.00) from holding Torex Gold Resources or give up 5.87% of portfolio value over 90 days.

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

Emerson Electric  vs.  Torex Gold Resources

Emerson Electric

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 8 (%) 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.

Torex Gold Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Torex Gold Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Torex Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Emerson Electric and Torex Gold

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

The idea behind Emerson Electric and Torex Gold Resources 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.