Correlation Between EMCOR and Construction Partners
Can any of the company-specific risk be diversified away by investing in both EMCOR and Construction Partners 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 Construction Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Construction Partners, you can compare the effects of market volatilities on EMCOR and Construction Partners 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 Construction Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Construction Partners.
Diversification Opportunities for EMCOR and Construction Partners
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between EMCOR and Construction is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Construction Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construction Partners 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 Construction Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construction Partners has no effect on the direction of EMCOR i.e., EMCOR and Construction Partners go up and down completely randomly.
Pair Corralation between EMCOR and Construction Partners
Considering the 90-day investment horizon EMCOR is expected to generate 1.06 times less return on investment than Construction Partners. But when comparing it to its historical volatility, EMCOR Group is 1.71 times less risky than Construction Partners. It trades about 0.38 of its potential returns per unit of risk. Construction Partners is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 8,177 in Construction Partners on August 24, 2024 and sell it today you would earn a total of 1,508 from holding Construction Partners or generate 18.44% 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. Construction Partners
Performance |
| Timeline |
| EMCOR Group |
| Construction Partners |
EMCOR and Construction Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Construction Partners
The main advantage of trading using opposite EMCOR and Construction Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Construction Partners 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 Construction Partners will offset losses from the drop in Construction Partners' long position.| EMCOR vs. Jacobs Solutions | EMCOR vs. Dycom Industries | EMCOR vs. Innovate Corp | EMCOR vs. Energy Services |
| Construction Partners vs. MYR Group | Construction Partners vs. Granite Construction Incorporated | Construction Partners vs. Tutor Perini | Construction Partners vs. Sterling Construction |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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