Correlation Between Emerson Electric and Yokogawa Electric

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

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

Diversification Opportunities for Emerson Electric and Yokogawa Electric

0.58

Correlation Coefficient

Emerson Electric  Yokogawa Electric

Very weak diversification

The 3 months correlation between Emerson and Yokogawa is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Yokogawa Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokogawa Electric 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 Yokogawa Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokogawa Electric has no effect on the direction of Emerson Electric i.e., Emerson Electric and Yokogawa Electric go up and down completely randomly.

Pair Corralation between Emerson Electric and Yokogawa Electric

If you would invest  10,106  in Emerson Electric on September 12, 2024 and sell it today you would earn a total of  2,809  from holding Emerson Electric or generate 27.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Emerson Electric  vs.  Yokogawa Electric

Emerson Electric

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Emerson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Yokogawa Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yokogawa Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Yokogawa Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Emerson Electric and Yokogawa Electric

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

The idea behind Emerson Electric and Yokogawa 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.