Correlation Between EMCOR and Quanta Services
Can any of the company-specific risk be diversified away by investing in both EMCOR and Quanta Services 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 Quanta Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Quanta Services, you can compare the effects of market volatilities on EMCOR and Quanta Services 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 Quanta Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Quanta Services.
Diversification Opportunities for EMCOR and Quanta Services
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between EMCOR and Quanta is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Quanta Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanta Services 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 Quanta Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanta Services has no effect on the direction of EMCOR i.e., EMCOR and Quanta Services go up and down completely randomly.
Pair Corralation between EMCOR and Quanta Services
Considering the 90-day investment horizon EMCOR Group is expected to generate 1.0 times more return on investment than Quanta Services. However, EMCOR is 1.0 times more volatile than Quanta Services. It trades about 0.14 of its potential returns per unit of risk. Quanta Services is currently generating about 0.1 per unit of risk. If you would invest 31,292 in EMCOR Group on August 27, 2024 and sell it today you would earn a total of 19,200 from holding EMCOR Group or generate 61.36% 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. Quanta Services
Performance |
Timeline |
EMCOR Group |
Quanta Services |
EMCOR and Quanta Services Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EMCOR and Quanta Services
The main advantage of trading using opposite EMCOR and Quanta Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Quanta Services 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 Quanta Services will offset losses from the drop in Quanta Services' long position.The idea behind EMCOR Group and Quanta Services 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.Quanta Services vs. Innovate Corp | Quanta Services vs. Energy Services | Quanta Services vs. Api Group Corp | Quanta Services vs. Topbuild Corp |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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