Correlation Between Hillenbrand and Emerson Electric

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

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

Diversification Opportunities for Hillenbrand and Emerson Electric

0.91

Correlation Coefficient

Hillenbrand  Emerson Electric

Almost no diversification

The 3 months correlation between Hillenbrand and Emerson is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Hillenbrand and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Hillenbrand 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 Hillenbrand 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 Hillenbrand i.e., Hillenbrand and Emerson Electric go up and down completely randomly.

Pair Corralation between Hillenbrand and Emerson Electric

Allowing for the 90-day total investment horizon Hillenbrand is expected to under-perform the Emerson Electric. In addition to that, Hillenbrand is 1.63 times more volatile than Emerson Electric. It trades about -0.11 of its total potential returns per unit of risk. Emerson Electric is currently generating about -0.12 per unit of volatility. If you would invest  12,374  in Emerson Electric on December 30, 2024 and sell it today you would lose (1,510) from holding Emerson Electric or give up 12.2% of portfolio value over 90 days.

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

Hillenbrand  vs.  Emerson Electric

Hillenbrand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hillenbrand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 Hillenbrand and Emerson Electric

The main advantage of trading using opposite Hillenbrand and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hillenbrand 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 Hillenbrand 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.