Correlation Between EMCOR and Stantec
Can any of the company-specific risk be diversified away by investing in both EMCOR and Stantec 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 Stantec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Stantec, you can compare the effects of market volatilities on EMCOR and Stantec 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 Stantec. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Stantec.
Diversification Opportunities for EMCOR and Stantec
Very weak diversification
The 3 months correlation between EMCOR and Stantec is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Stantec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stantec 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 Stantec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stantec has no effect on the direction of EMCOR i.e., EMCOR and Stantec go up and down completely randomly.
Pair Corralation between EMCOR and Stantec
Considering the 90-day investment horizon EMCOR Group is expected to generate 1.42 times more return on investment than Stantec. However, EMCOR is 1.42 times more volatile than Stantec. It trades about 0.39 of its potential returns per unit of risk. Stantec is currently generating about 0.17 per unit of risk. If you would invest 43,156 in EMCOR Group on August 27, 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCOR Group vs. Stantec
Performance |
| Timeline |
| EMCOR Group |
| Stantec |
EMCOR and Stantec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Stantec
The main advantage of trading using opposite EMCOR and Stantec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Stantec 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 Stantec will offset losses from the drop in Stantec's long position.The idea behind EMCOR Group and Stantec 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.| Stantec vs. EMCOR Group | Stantec vs. Comfort Systems USA | Stantec vs. Primoris Services | Stantec vs. Granite Construction Incorporated |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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