Correlation Between EMCOR and ChampionX
Can any of the company-specific risk be diversified away by investing in both EMCOR and ChampionX 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 ChampionX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and ChampionX, you can compare the effects of market volatilities on EMCOR and ChampionX 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 ChampionX. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and ChampionX.
Diversification Opportunities for EMCOR and ChampionX
Weak diversification
The 3 months correlation between EMCOR and ChampionX is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX 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 ChampionX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChampionX has no effect on the direction of EMCOR i.e., EMCOR and ChampionX go up and down completely randomly.
Pair Corralation between EMCOR and ChampionX
Considering the 90-day investment horizon EMCOR Group is expected to generate 0.88 times more return on investment than ChampionX. However, EMCOR Group is 1.13 times less risky than ChampionX. It trades about 0.38 of its potential returns per unit of risk. ChampionX is currently generating about 0.13 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCOR Group vs. ChampionX
Performance |
| Timeline |
| EMCOR Group |
| ChampionX |
EMCOR and ChampionX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and ChampionX
The main advantage of trading using opposite EMCOR and ChampionX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, ChampionX 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 ChampionX will offset losses from the drop in ChampionX's long position.The idea behind EMCOR Group and ChampionX 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.| ChampionX vs. ProPetro Holding Corp | ChampionX vs. RPC Inc | ChampionX vs. MRC Global | ChampionX vs. Expro Group Holdings |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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