Correlation Between Yokogawa Electric and Emerson Electric

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

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

Diversification Opportunities for Yokogawa Electric and Emerson Electric

-0.77

Correlation Coefficient

Yokogawa Electric  Emerson Electric

Pay attention - limited upside

The 3 months correlation between Yokogawa and Emerson is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Yokogawa Electric Corp and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Yokogawa 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 Yokogawa Electric Corp 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 Yokogawa Electric i.e., Yokogawa Electric and Emerson Electric go up and down completely randomly.

Pair Corralation between Yokogawa Electric and Emerson Electric

Assuming the 90 days horizon Yokogawa Electric Corp is expected to under-perform the Emerson Electric. In addition to that, Yokogawa Electric is 1.3 times more volatile than Emerson Electric. It trades about -0.08 of its total potential returns per unit of risk. Emerson Electric is currently generating about 0.23 per unit of volatility. 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 Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Yokogawa Electric Corp  vs.  Emerson Electric

Yokogawa Electric Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yokogawa Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Yokogawa Electric and Emerson Electric

The main advantage of trading using opposite Yokogawa Electric and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yokogawa Electric 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 Yokogawa Electric Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.