Correlation Between Consolidated Construction and Emkay Global
Can any of the company-specific risk be diversified away by investing in both Consolidated Construction and Emkay Global 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 Consolidated Construction and Emkay Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Construction Consortium and Emkay Global Financial, you can compare the effects of market volatilities on Consolidated Construction and Emkay Global 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 Consolidated Construction with a short position of Emkay Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Construction and Emkay Global.
Diversification Opportunities for Consolidated Construction and Emkay Global
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consolidated and Emkay is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Construction Cons and Emkay Global Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emkay Global Financial and Consolidated Construction 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 Consolidated Construction Consortium are associated (or correlated) with Emkay Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emkay Global Financial has no effect on the direction of Consolidated Construction i.e., Consolidated Construction and Emkay Global go up and down completely randomly.
Pair Corralation between Consolidated Construction and Emkay Global
Assuming the 90 days trading horizon Consolidated Construction Consortium is expected to generate 1.9 times more return on investment than Emkay Global. However, Consolidated Construction is 1.9 times more volatile than Emkay Global Financial. It trades about -0.04 of its potential returns per unit of risk. Emkay Global Financial is currently generating about -0.36 per unit of risk. If you would invest 1,800 in Consolidated Construction Consortium on October 12, 2024 and sell it today you would lose (54.00) from holding Consolidated Construction Consortium or give up 3.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Construction Cons vs. Emkay Global Financial
Performance |
| Timeline |
| Consolidated Construction |
| Emkay Global Financial |
Consolidated Construction and Emkay Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Construction and Emkay Global
The main advantage of trading using opposite Consolidated Construction and Emkay Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Construction position performs unexpectedly, Emkay Global 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 Emkay Global will offset losses from the drop in Emkay Global's long position.The idea behind Consolidated Construction Consortium and Emkay Global Financial 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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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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