Correlation Between GE Vernova and Emerson Electric

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

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

Diversification Opportunities for GE Vernova and Emerson Electric

0.61

Correlation Coefficient

GE Vernova  Emerson Electric

Poor diversification

The 3 months correlation between GEV and Emerson is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and GE Vernova 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 GE Vernova LLC 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 GE Vernova i.e., GE Vernova and Emerson Electric go up and down completely randomly.

Pair Corralation between GE Vernova and Emerson Electric

Considering the 90-day investment horizon GE Vernova LLC is expected to generate 2.79 times more return on investment than Emerson Electric. However, GE Vernova is 2.79 times more volatile than Emerson Electric. It trades about 0.01 of its potential returns per unit of risk. Emerson Electric is currently generating about -0.08 per unit of risk. If you would invest  34,492  in GE Vernova LLC on December 22, 2024 and sell it today you would lose (1,105) from holding GE Vernova LLC or give up 3.2% of portfolio value over 90 days.

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

GE Vernova LLC  vs.  Emerson Electric

GE Vernova LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days GE Vernova LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, GE Vernova is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with GE Vernova and Emerson Electric

The main advantage of trading using opposite GE Vernova and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Vernova 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 GE Vernova LLC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.