Correlation Between Keurig Dr and Emerson Electric

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

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

Diversification Opportunities for Keurig Dr and Emerson Electric

-0.81

Correlation Coefficient

Keurig Dr  Emerson Electric

Pay attention - limited upside

The 3 months correlation between Keurig and Emerson is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Keurig Dr 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 Keurig Dr Pepper 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 Keurig Dr i.e., Keurig Dr and Emerson Electric go up and down completely randomly.

Pair Corralation between Keurig Dr and Emerson Electric

Considering the 90-day investment horizon Keurig Dr Pepper is expected to under-perform the Emerson Electric. But the stock apears to be less risky and, when comparing its historical volatility, Keurig Dr Pepper is 1.71 times less risky than Emerson Electric. The stock trades about -0.02 of its potential returns per unit of risk. The Emerson Electric is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  10,936  in Emerson Electric on September 5, 2024 and sell it today you would earn a total of  2,404  from holding Emerson Electric or generate 21.98% return on investment over 90 days.

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

Keurig Dr Pepper  vs.  Emerson Electric

Keurig Dr Pepper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keurig Dr Pepper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Emerson Electric

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 21 (%) 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 Keurig Dr and Emerson Electric

The main advantage of trading using opposite Keurig Dr and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr 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 Keurig Dr Pepper 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.