Correlation Between John Wiley and Emerson Electric

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

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

Diversification Opportunities for John Wiley and Emerson Electric

0.33

Correlation Coefficient

John Wiley  Emerson Electric

Weak diversification

The 3 months correlation between John and Emerson is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding John Wiley Sons and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and John Wiley 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 John Wiley Sons 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 John Wiley i.e., John Wiley and Emerson Electric go up and down completely randomly.

Pair Corralation between John Wiley and Emerson Electric

Given the investment horizon of 90 days John Wiley Sons is expected to under-perform the Emerson Electric. In addition to that, John Wiley is 2.58 times more volatile than Emerson Electric. It trades about -0.59 of its total potential returns per unit of risk. Emerson Electric is currently generating about -0.05 per unit of volatility. If you would invest  12,956  in Emerson Electric on September 20, 2024 and sell it today you would lose (148.00) from holding Emerson Electric or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	57.14%
Values	Daily Returns

John Wiley Sons  vs.  Emerson Electric

John Wiley Sons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days John Wiley Sons has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, John Wiley 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

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Emerson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with John Wiley and Emerson Electric

The main advantage of trading using opposite John Wiley and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Wiley 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 John Wiley Sons 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.