Correlation Between Argan and EMCOR
Can any of the company-specific risk be diversified away by investing in both Argan 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 Argan and EMCOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Argan Inc and EMCOR Group, you can compare the effects of market volatilities on Argan 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 Argan with a short position of EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argan and EMCOR.
Diversification Opportunities for Argan and EMCOR
Almost no diversification
The 3 months correlation between Argan and EMCOR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Argan Inc and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and Argan 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 Argan 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 Argan i.e., Argan and EMCOR go up and down completely randomly.
Pair Corralation between Argan and EMCOR
Considering the 90-day investment horizon Argan Inc is expected to generate 1.76 times more return on investment than EMCOR. However, Argan is 1.76 times more volatile than EMCOR Group. It trades about 0.2 of its potential returns per unit of risk. EMCOR Group is currently generating about 0.14 per unit of risk. If you would invest 4,631 in Argan Inc on August 27, 2024 and sell it today you would earn a total of 11,232 from holding Argan Inc or generate 242.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Argan Inc vs. EMCOR Group
Performance |
| Timeline |
| Argan Inc |
| EMCOR Group |
Argan and EMCOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Argan and EMCOR
The main advantage of trading using opposite Argan and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argan 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.The idea behind Argan Inc and EMCOR Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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