Correlation Between EMCOR and Simpson Manufacturing
Can any of the company-specific risk be diversified away by investing in both EMCOR and Simpson Manufacturing 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 Simpson Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Simpson Manufacturing, you can compare the effects of market volatilities on EMCOR and Simpson Manufacturing 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 Simpson Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Simpson Manufacturing.
Diversification Opportunities for EMCOR and Simpson Manufacturing
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EMCOR and Simpson is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Simpson Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simpson Manufacturing 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 Simpson Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simpson Manufacturing has no effect on the direction of EMCOR i.e., EMCOR and Simpson Manufacturing go up and down completely randomly.
Pair Corralation between EMCOR and Simpson Manufacturing
Considering the 90-day investment horizon EMCOR Group is expected to under-perform the Simpson Manufacturing. In addition to that, EMCOR is 1.52 times more volatile than Simpson Manufacturing. It trades about -0.15 of its total potential returns per unit of risk. Simpson Manufacturing is currently generating about -0.08 per unit of volatility. If you would invest 16,963 in Simpson Manufacturing on December 1, 2024 and sell it today you would lose (523.00) from holding Simpson Manufacturing or give up 3.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCOR Group vs. Simpson Manufacturing
Performance |
| Timeline |
| EMCOR Group |
| Simpson Manufacturing |
EMCOR and Simpson Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Simpson Manufacturing
The main advantage of trading using opposite EMCOR and Simpson Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Simpson Manufacturing 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 Simpson Manufacturing will offset losses from the drop in Simpson Manufacturing's long position.The idea behind EMCOR Group and Simpson Manufacturing 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.| Simpson Manufacturing vs. West Fraser Timber | Simpson Manufacturing vs. Interfor | Simpson Manufacturing vs. Ufp Industries | Simpson Manufacturing vs. Canfor |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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