Correlation Between Emerson Electric and Kulicke

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

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

Diversification Opportunities for Emerson Electric and Kulicke

-0.31

Correlation Coefficient

Emerson Electric  Kulicke

Very good diversification

The 3 months correlation between Emerson and Kulicke is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Kulicke and Soffa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kulicke and Soffa 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 Kulicke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kulicke and Soffa has no effect on the direction of Emerson Electric i.e., Emerson Electric and Kulicke go up and down completely randomly.

Pair Corralation between Emerson Electric and Kulicke

Considering the 90-day investment horizon Emerson Electric is expected to generate 0.39 times more return on investment than Kulicke. However, Emerson Electric is 2.58 times less risky than Kulicke. It trades about -0.34 of its potential returns per unit of risk. Kulicke and Soffa is currently generating about -0.17 per unit of risk. If you would invest  11,354  in Emerson Electric on January 31, 2024 and sell it today you would lose (576.00) from holding Emerson Electric or give up 5.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Emerson Electric  vs.  Kulicke and Soffa

Emerson Electric

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Emerson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Kulicke and Soffa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kulicke and Soffa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Kulicke is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Emerson Electric and Kulicke

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

The idea behind Emerson Electric and Kulicke and Soffa 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.