Correlation Between EMCOR and AerSale Corp
Can any of the company-specific risk be diversified away by investing in both EMCOR and AerSale Corp 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 AerSale Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and AerSale Corp, you can compare the effects of market volatilities on EMCOR and AerSale Corp 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 AerSale Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and AerSale Corp.
Diversification Opportunities for EMCOR and AerSale Corp
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EMCOR and AerSale is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and AerSale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerSale Corp 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 AerSale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerSale Corp has no effect on the direction of EMCOR i.e., EMCOR and AerSale Corp go up and down completely randomly.
Pair Corralation between EMCOR and AerSale Corp
Considering the 90-day investment horizon EMCOR Group is expected to generate 0.77 times more return on investment than AerSale Corp. However, EMCOR Group is 1.3 times less risky than AerSale Corp. It trades about 0.39 of its potential returns per unit of risk. AerSale Corp is currently generating about 0.28 per unit of risk. If you would invest 43,156 in EMCOR Group on August 28, 2024 and sell it today you would earn a total of 7,943 from holding EMCOR Group or generate 18.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCOR Group vs. AerSale Corp
Performance |
| Timeline |
| EMCOR Group |
| AerSale Corp |
EMCOR and AerSale Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and AerSale Corp
The main advantage of trading using opposite EMCOR and AerSale Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, AerSale Corp 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 AerSale Corp will offset losses from the drop in AerSale Corp's long position.The idea behind EMCOR Group and AerSale Corp 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.| AerSale Corp vs. Grupo Aeroportuario del | AerSale Corp vs. Grupo Aeroportuario del | AerSale Corp vs. Corporacion America Airports | AerSale Corp vs. Aeroports de Paris |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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