Correlation Between EMCOR and BCE
Can any of the company-specific risk be diversified away by investing in both EMCOR and BCE 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 BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and BCE Inc, you can compare the effects of market volatilities on EMCOR and BCE 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 BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and BCE.
Diversification Opportunities for EMCOR and BCE
Pay attention - limited upside
The 3 months correlation between EMCOR and BCE is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of EMCOR i.e., EMCOR and BCE go up and down completely randomly.
Pair Corralation between EMCOR and BCE
Considering the 90-day investment horizon EMCOR Group is expected to generate 1.14 times more return on investment than BCE. However, EMCOR is 1.14 times more volatile than BCE Inc. It trades about 0.33 of its potential returns per unit of risk. BCE Inc is currently generating about -0.24 per unit of risk. If you would invest 35,843 in EMCOR Group on September 2, 2024 and sell it today you would earn a total of 15,169 from holding EMCOR Group or generate 42.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCOR Group vs. BCE Inc
Performance |
| Timeline |
| EMCOR Group |
| BCE Inc |
EMCOR and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and BCE
The main advantage of trading using opposite EMCOR and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.The idea behind EMCOR Group and BCE Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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