Correlation Between Big Tree and EMCOR
Can any of the company-specific risk be diversified away by investing in both Big Tree 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 Big Tree and EMCOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Tree Cloud and EMCOR Group, you can compare the effects of market volatilities on Big Tree 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 Big Tree with a short position of EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tree and EMCOR.
Diversification Opportunities for Big Tree and EMCOR
Good diversification
The 3 months correlation between Big and EMCOR is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Big Tree Cloud and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and Big Tree 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 Big Tree Cloud 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 Big Tree i.e., Big Tree and EMCOR go up and down completely randomly.
Pair Corralation between Big Tree and EMCOR
Assuming the 90 days horizon Big Tree Cloud is expected to generate 4.9 times more return on investment than EMCOR. However, Big Tree is 4.9 times more volatile than EMCOR Group. It trades about 0.02 of its potential returns per unit of risk. EMCOR Group is currently generating about 0.09 per unit of risk. If you would invest 5.28 in Big Tree Cloud on November 2, 2024 and sell it today you would lose (2.34) from holding Big Tree Cloud or give up 44.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.03% |
| Values | Daily Returns |
Big Tree Cloud vs. EMCOR Group
Performance |
| Timeline |
| Big Tree Cloud |
| EMCOR Group |
Big Tree and EMCOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Tree and EMCOR
The main advantage of trading using opposite Big Tree and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Tree 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.| Big Tree vs. Belden Inc | Big Tree vs. Energy and Environmental | Big Tree vs. Toro Co | Big Tree vs. Tianjin Capital Environmental |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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