Correlation Between Emerson Electric and Biocardia

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

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

Diversification Opportunities for Emerson Electric and Biocardia

-0.72

Correlation Coefficient

Emerson Electric  Biocardia

Pay attention - limited upside

The 3 months correlation between Emerson and Biocardia is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Biocardia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biocardia and Emerson Electric 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 Emerson Electric are associated (or correlated) with Biocardia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biocardia has no effect on the direction of Emerson Electric i.e., Emerson Electric and Biocardia go up and down completely randomly.

Pair Corralation between Emerson Electric and Biocardia

Considering the 90-day investment horizon Emerson Electric is expected to under-perform the Biocardia. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Electric is 4.12 times less risky than Biocardia. The stock trades about -0.18 of its potential returns per unit of risk. The Biocardia is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  228.00  in Biocardia on September 30, 2024 and sell it today you would earn a total of  18.00  from holding Biocardia or generate 7.89% return on investment over 90 days.

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

Emerson Electric  vs.  Biocardia

Emerson Electric

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 10 (%) 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.

Biocardia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biocardia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Emerson Electric and Biocardia

The main advantage of trading using opposite Emerson Electric and Biocardia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Biocardia 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 Biocardia will offset losses from the drop in Biocardia's long position.

The idea behind Emerson Electric and Biocardia 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.