Correlation Between EMCOR and Limbach Holdings
Can any of the company-specific risk be diversified away by investing in both EMCOR and Limbach Holdings 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 Limbach Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Limbach Holdings, you can compare the effects of market volatilities on EMCOR and Limbach Holdings 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 Limbach Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Limbach Holdings.
Diversification Opportunities for EMCOR and Limbach Holdings
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between EMCOR and Limbach is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Limbach Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limbach Holdings 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 Limbach Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limbach Holdings has no effect on the direction of EMCOR i.e., EMCOR and Limbach Holdings go up and down completely randomly.
Pair Corralation between EMCOR and Limbach Holdings
Considering the 90-day investment horizon EMCOR is expected to generate 1.31 times less return on investment than Limbach Holdings. But when comparing it to its historical volatility, EMCOR Group is 2.56 times less risky than Limbach Holdings. It trades about 0.37 of its potential returns per unit of risk. Limbach Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 8,113 in Limbach Holdings on August 24, 2024 and sell it today you would earn a total of 1,787 from holding Limbach Holdings or generate 22.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCOR Group vs. Limbach Holdings
Performance |
| Timeline |
| EMCOR Group |
| Limbach Holdings |
EMCOR and Limbach Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Limbach Holdings
The main advantage of trading using opposite EMCOR and Limbach Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Limbach Holdings 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 Limbach Holdings will offset losses from the drop in Limbach Holdings' long position.The idea behind EMCOR Group and Limbach Holdings 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.| Limbach Holdings vs. MYR Group | Limbach Holdings vs. Granite Construction Incorporated | Limbach Holdings vs. Construction Partners | Limbach Holdings vs. Great Lakes Dredge |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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