Correlation Between Four Seasons and Emerson Electric

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

By analyzing existing cross correlation between Four Seasons Education and Emerson Electric, you can compare the effects of market volatilities on Four Seasons and Emerson Electric 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 Four Seasons with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Seasons and Emerson Electric.

Diversification Opportunities for Four Seasons and Emerson Electric

-0.45

Correlation Coefficient

Four Seasons  Emerson Electric

Very good diversification

The 3 months correlation between Four and Emerson is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Four Seasons 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 Four Seasons Education are associated (or correlated) with Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Four Seasons i.e., Four Seasons and Emerson Electric go up and down completely randomly.

Pair Corralation between Four Seasons and Emerson Electric

Given the investment horizon of 90 days Four Seasons Education is expected to generate 1.95 times more return on investment than Emerson Electric. However, Four Seasons is 1.95 times more volatile than Emerson Electric. It trades about -0.07 of its potential returns per unit of risk. Emerson Electric is currently generating about -0.26 per unit of risk. If you would invest  1,091  in Four Seasons Education on September 24, 2024 and sell it today you would lose (46.00) from holding Four Seasons Education or give up 4.22% of portfolio value over 90 days.

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

Four Seasons Education  vs.  Emerson Electric

Four Seasons Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Four Seasons Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Emerson Electric

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 11 (%) 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.

Pair Trading with Four Seasons and Emerson Electric

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

The idea behind Four Seasons Education and Emerson Electric 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.