Correlation Between Emerson Electric and Nordson

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Can any of the company-specific risk be diversified away by investing in both Emerson Electric and Nordson 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 Nordson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Nordson, you can compare the effects of market volatilities on Emerson Electric and Nordson 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 Nordson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Nordson.

Diversification Opportunities for Emerson Electric and Nordson

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Emerson and Nordson is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Nordson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordson 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 Nordson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordson has no effect on the direction of Emerson Electric i.e., Emerson Electric and Nordson go up and down completely randomly.

Pair Corralation between Emerson Electric and Nordson

Considering the 90-day investment horizon Emerson Electric is expected to generate 1.07 times more return on investment than Nordson. However, Emerson Electric is 1.07 times more volatile than Nordson. It trades about 0.24 of its potential returns per unit of risk. Nordson is currently generating about 0.09 per unit of risk. If you would invest  10,841  in Emerson Electric on April 22, 2024 and sell it today you would earn a total of  727.00  from holding Emerson Electric or generate 6.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Emerson Electric  vs.  Nordson

 Performance 
       Timeline  
Emerson Electric 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 6 (%) 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 August 2024.
Nordson 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nordson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Emerson Electric and Nordson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Emerson Electric and Nordson

The main advantage of trading using opposite Emerson Electric and Nordson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric position performs unexpectedly, Nordson 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 Nordson will offset losses from the drop in Nordson's long position.
The idea behind Emerson Electric and Nordson 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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