Correlation Between Emerson Electric and Where Food

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

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

Diversification Opportunities for Emerson Electric and Where Food

0.05

Correlation Coefficient

Emerson Electric  Where Food

Significant diversification

The 3 months correlation between Emerson and Where is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Where Food Comes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Where Food Comes 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 Where Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Where Food Comes has no effect on the direction of Emerson Electric i.e., Emerson Electric and Where Food go up and down completely randomly.

Pair Corralation between Emerson Electric and Where Food

Considering the 90-day investment horizon Emerson Electric is expected to under-perform the Where Food. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Electric is 1.73 times less risky than Where Food. The stock trades about -0.06 of its potential returns per unit of risk. The Where Food Comes is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,180  in Where Food Comes on December 5, 2024 and sell it today you would lose (50.00) from holding Where Food Comes or give up 4.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Emerson Electric  vs.  Where Food Comes

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.

Where Food Comes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Where Food Comes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Emerson Electric and Where Food

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

The idea behind Emerson Electric and Where Food Comes 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.