Correlation Between EMCOR and Valmont Industries

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Can any of the company-specific risk be diversified away by investing in both EMCOR and Valmont Industries 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 Valmont Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Valmont Industries, you can compare the effects of market volatilities on EMCOR and Valmont Industries 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 Valmont Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Valmont Industries.

Diversification Opportunities for EMCOR and Valmont Industries

EMCORValmontDiversified AwayEMCORValmontDiversified Away100%
0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between EMCOR and Valmont is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries 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 Valmont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmont Industries has no effect on the direction of EMCOR i.e., EMCOR and Valmont Industries go up and down completely randomly.

Pair Corralation between EMCOR and Valmont Industries

Considering the 90-day investment horizon EMCOR Group is expected to under-perform the Valmont Industries. In addition to that, EMCOR is 4.08 times more volatile than Valmont Industries. It trades about -0.2 of its total potential returns per unit of risk. Valmont Industries is currently generating about -0.29 per unit of volatility. If you would invest  34,283  in Valmont Industries on November 21, 2024 and sell it today you would lose (2,204) from holding Valmont Industries or give up 6.43% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

EMCOR Group  vs.  Valmont Industries

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-505
JavaScript chart by amCharts 3.21.15EME VMI
       Timeline  
EMCOR Group 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days EMCOR Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb420440460480500520540
Valmont Industries 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Valmont Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Valmont Industries is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb300310320330340350

EMCOR and Valmont Industries Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.0-3.74-2.49-1.230.01.162.333.494.65 0.050.100.150.20
JavaScript chart by amCharts 3.21.15EME VMI
       Returns  

Pair Trading with EMCOR and Valmont Industries

The main advantage of trading using opposite EMCOR and Valmont Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Valmont Industries 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 Valmont Industries will offset losses from the drop in Valmont Industries' long position.
The idea behind EMCOR Group and Valmont Industries 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.
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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