Correlation Between Pinterest and Emerson Electric

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

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

Diversification Opportunities for Pinterest and Emerson Electric

-0.55

Correlation Coefficient

Pinterest  Emerson Electric

Excellent diversification

The 3 months correlation between Pinterest and Emerson is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pinterest and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Pinterest 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 Pinterest 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 Pinterest i.e., Pinterest and Emerson Electric go up and down completely randomly.

Pair Corralation between Pinterest and Emerson Electric

Given the investment horizon of 90 days Pinterest is expected to generate 1.21 times less return on investment than Emerson Electric. In addition to that, Pinterest is 1.79 times more volatile than Emerson Electric. It trades about 0.03 of its total potential returns per unit of risk. Emerson Electric is currently generating about 0.06 per unit of volatility. If you would invest  8,328  in Emerson Electric on October 10, 2024 and sell it today you would earn a total of  3,740  from holding Emerson Electric or generate 44.91% return on investment over 90 days.

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

Pinterest  vs.  Emerson Electric

Pinterest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinterest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pinterest is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Emerson Electric

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 7 (%) 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 Pinterest and Emerson Electric

The main advantage of trading using opposite Pinterest and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinterest 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 Pinterest 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.