Correlation Between HNI Corp and Emerson Electric

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

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

Diversification Opportunities for HNI Corp and Emerson Electric

0.56

Correlation Coefficient

HNI Corp  Emerson Electric

Very weak diversification

The 3 months correlation between HNI and Emerson is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding HNI Corp and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and HNI Corp 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 HNI Corp 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 HNI Corp i.e., HNI Corp and Emerson Electric go up and down completely randomly.

Pair Corralation between HNI Corp and Emerson Electric

Considering the 90-day investment horizon HNI Corp is expected to under-perform the Emerson Electric. But the stock apears to be less risky and, when comparing its historical volatility, HNI Corp is 1.14 times less risky than Emerson Electric. The stock trades about -0.56 of its potential returns per unit of risk. The Emerson Electric is currently generating about -0.31 of returns per unit of risk over similar time horizon. If you would invest  13,087  in Emerson Electric on October 12, 2024 and sell it today you would lose (1,057) from holding Emerson Electric or give up 8.08% of portfolio value over 90 days.

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

HNI Corp  vs.  Emerson Electric

HNI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Emerson Electric

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Emerson Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HNI Corp and Emerson Electric

The main advantage of trading using opposite HNI Corp and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNI Corp 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 HNI Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.