Correlation Between EMCOR and Aldel Financial
Can any of the company-specific risk be diversified away by investing in both EMCOR and Aldel Financial 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 EMCOR and Aldel Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Aldel Financial II, you can compare the effects of market volatilities on EMCOR and Aldel Financial 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 EMCOR with a short position of Aldel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Aldel Financial.
Diversification Opportunities for EMCOR and Aldel Financial
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between EMCOR and Aldel is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Aldel Financial II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldel Financial II and EMCOR 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 EMCOR Group are associated (or correlated) with Aldel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldel Financial II has no effect on the direction of EMCOR i.e., EMCOR and Aldel Financial go up and down completely randomly.
Pair Corralation between EMCOR and Aldel Financial
Considering the 90-day investment horizon EMCOR Group is expected to generate 16.77 times more return on investment than Aldel Financial. However, EMCOR is 16.77 times more volatile than Aldel Financial II. It trades about 0.16 of its potential returns per unit of risk. Aldel Financial II is currently generating about 0.0 per unit of risk. If you would invest 16,560 in EMCOR Group on August 31, 2024 and sell it today you would earn a total of 34,235 from holding EMCOR Group or generate 206.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 7.11% |
| Values | Daily Returns |
EMCOR Group vs. Aldel Financial II
Performance |
| Timeline |
| EMCOR Group |
| Aldel Financial II |
EMCOR and Aldel Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Aldel Financial
The main advantage of trading using opposite EMCOR and Aldel Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Aldel Financial 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 Aldel Financial will offset losses from the drop in Aldel Financial's long position.The idea behind EMCOR Group and Aldel Financial II 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.| Aldel Financial vs. RBC Bearings Incorporated | Aldel Financial vs. CECO Environmental Corp | Aldel Financial vs. EMCOR Group | Aldel Financial vs. Simpson Manufacturing |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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