Correlation Between McEwen Mining and Emerson Electric

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

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

Diversification Opportunities for McEwen Mining and Emerson Electric

0.24

Correlation Coefficient

McEwen Mining  Emerson Electric

Modest diversification

The 3 months correlation between McEwen and Emerson is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding McEwen Mining and Emerson Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and McEwen Mining 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 McEwen Mining 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 McEwen Mining i.e., McEwen Mining and Emerson Electric go up and down completely randomly.

Pair Corralation between McEwen Mining and Emerson Electric

Assuming the 90 days trading horizon McEwen Mining is expected to generate 15.45 times more return on investment than Emerson Electric. However, McEwen Mining is 15.45 times more volatile than Emerson Electric Co. It trades about 0.1 of its potential returns per unit of risk. Emerson Electric Co is currently generating about 0.1 per unit of risk. If you would invest  7,500  in McEwen Mining on September 30, 2024 and sell it today you would earn a total of  12,300  from holding McEwen Mining or generate 164.0% return on investment over 90 days.

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

McEwen Mining  vs.  Emerson Electric Co

McEwen Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McEwen Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, McEwen Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerson Electric

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Emerson Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with McEwen Mining and Emerson Electric

The main advantage of trading using opposite McEwen Mining and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McEwen Mining 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 McEwen Mining and Emerson Electric Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.