Correlation Between Emerson Electric and U Power

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

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

Diversification Opportunities for Emerson Electric and U Power

-0.41

Correlation Coefficient

Emerson Electric  U Power

Very good diversification

The 3 months correlation between Emerson and UCAR is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and U Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Power Limited 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 U Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Power Limited has no effect on the direction of Emerson Electric i.e., Emerson Electric and U Power go up and down completely randomly.

Pair Corralation between Emerson Electric and U Power

Considering the 90-day investment horizon Emerson Electric is expected to generate 0.35 times more return on investment than U Power. However, Emerson Electric is 2.85 times less risky than U Power. It trades about 0.19 of its potential returns per unit of risk. U Power Limited is currently generating about 0.04 per unit of risk. If you would invest  10,822  in Emerson Electric on October 26, 2024 and sell it today you would earn a total of  2,295  from holding Emerson Electric or generate 21.21% 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.  U Power Limited

Emerson Electric

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 14 (%) 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.

U Power Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in U Power Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, U Power may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Emerson Electric and U Power

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

The idea behind Emerson Electric and U Power Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.