Correlation Between EMCOR and Innovate Corp
Can any of the company-specific risk be diversified away by investing in both EMCOR and Innovate Corp 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 Innovate Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Innovate Corp, you can compare the effects of market volatilities on EMCOR and Innovate Corp 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 Innovate Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Innovate Corp.
Diversification Opportunities for EMCOR and Innovate Corp
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between EMCOR and Innovate is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Innovate Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovate Corp 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 Innovate Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovate Corp has no effect on the direction of EMCOR i.e., EMCOR and Innovate Corp go up and down completely randomly.
Pair Corralation between EMCOR and Innovate Corp
Considering the 90-day investment horizon EMCOR Group is expected to generate 0.22 times more return on investment than Innovate Corp. However, EMCOR Group is 4.47 times less risky than Innovate Corp. It trades about 0.34 of its potential returns per unit of risk. Innovate Corp is currently generating about 0.01 per unit of risk. If you would invest 43,679 in EMCOR Group on August 30, 2024 and sell it today you would earn a total of 7,116 from holding EMCOR Group or generate 16.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
EMCOR Group vs. Innovate Corp
Performance |
| Timeline |
| EMCOR Group |
| Innovate Corp |
EMCOR and Innovate Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Innovate Corp
The main advantage of trading using opposite EMCOR and Innovate Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Innovate Corp 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 Innovate Corp will offset losses from the drop in Innovate Corp's long position.The idea behind EMCOR Group and Innovate Corp 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.| Innovate Corp vs. Matrix Service Co | Innovate Corp vs. IES Holdings | Innovate Corp vs. MYR Group | Innovate Corp vs. Construction Partners |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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