Correlation Between Arcosa and EMCOR
Can any of the company-specific risk be diversified away by investing in both Arcosa and EMCOR 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 Arcosa and EMCOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arcosa Inc and EMCOR Group, you can compare the effects of market volatilities on Arcosa and EMCOR 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 Arcosa with a short position of EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arcosa and EMCOR.
Diversification Opportunities for Arcosa and EMCOR
Almost no diversification
The 3 months correlation between Arcosa and EMCOR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Arcosa Inc and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and Arcosa 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 Arcosa Inc are associated (or correlated) with EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of Arcosa i.e., Arcosa and EMCOR go up and down completely randomly.
Pair Corralation between Arcosa and EMCOR
Considering the 90-day investment horizon Arcosa is expected to generate 1.12 times less return on investment than EMCOR. But when comparing it to its historical volatility, Arcosa Inc is 1.2 times less risky than EMCOR. It trades about 0.4 of its potential returns per unit of risk. EMCOR Group is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 44,562 in EMCOR Group on August 24, 2024 and sell it today you would earn a total of 8,133 from holding EMCOR Group or generate 18.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arcosa Inc vs. EMCOR Group
Performance |
| Timeline |
| Arcosa Inc |
| EMCOR Group |
Arcosa and EMCOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arcosa and EMCOR
The main advantage of trading using opposite Arcosa and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arcosa position performs unexpectedly, EMCOR 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 EMCOR will offset losses from the drop in EMCOR's long position.| Arcosa vs. Construction Partners | Arcosa vs. Topbuild Corp | Arcosa vs. Comfort Systems USA | Arcosa vs. Ameresco |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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