Correlation Between Emerson Electric and Air Products

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

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

Diversification Opportunities for Emerson Electric and Air Products

0.9

Correlation Coefficient

Emerson Electric  Air Products

Almost no diversification

The 3 months correlation between Emerson and Air is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Emerson Electric i.e., Emerson Electric and Air Products go up and down completely randomly.

Pair Corralation between Emerson Electric and Air Products

Considering the 90-day investment horizon Emerson Electric is expected to generate 1.21 times more return on investment than Air Products. However, Emerson Electric is 1.21 times more volatile than Air Products and. It trades about 0.34 of its potential returns per unit of risk. Air Products and is currently generating about 0.09 per unit of risk. If you would invest  10,680  in Emerson Electric on May 6, 2025 and sell it today you would earn a total of  3,498  from holding Emerson Electric or generate 32.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Emerson Electric  vs.  Air Products and

Emerson Electric

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 26 (%) 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.

Air Products

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Air Products is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Emerson Electric and Air Products

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

The idea behind Emerson Electric and Air Products and 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.