Correlation Between Great Lakes and Limbach Holdings
Can any of the company-specific risk be diversified away by investing in both Great Lakes and Limbach Holdings 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 Great Lakes and Limbach Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Lakes Dredge and Limbach Holdings, you can compare the effects of market volatilities on Great Lakes and Limbach Holdings 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 Great Lakes with a short position of Limbach Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Lakes and Limbach Holdings.
Diversification Opportunities for Great Lakes and Limbach Holdings
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Great and Limbach is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Dredge and Limbach Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limbach Holdings and Great Lakes 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 Great Lakes Dredge are associated (or correlated) with Limbach Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limbach Holdings has no effect on the direction of Great Lakes i.e., Great Lakes and Limbach Holdings go up and down completely randomly.
Pair Corralation between Great Lakes and Limbach Holdings
Given the investment horizon of 90 days Great Lakes is expected to generate 5.61 times less return on investment than Limbach Holdings. But when comparing it to its historical volatility, Great Lakes Dredge is 2.42 times less risky than Limbach Holdings. It trades about 0.08 of its potential returns per unit of risk. Limbach Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 8,113 in Limbach Holdings on August 24, 2024 and sell it today you would earn a total of 1,787 from holding Limbach Holdings or generate 22.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Lakes Dredge vs. Limbach Holdings
Performance |
| Timeline |
| Great Lakes Dredge |
| Limbach Holdings |
Great Lakes and Limbach Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Lakes and Limbach Holdings
The main advantage of trading using opposite Great Lakes and Limbach Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Lakes position performs unexpectedly, Limbach Holdings 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 Limbach Holdings will offset losses from the drop in Limbach Holdings' long position.| Great Lakes vs. Primoris Services | Great Lakes vs. Granite Construction Incorporated | Great Lakes vs. MYR Group | Great Lakes vs. Southland Holdings |
| Limbach Holdings vs. MYR Group | Limbach Holdings vs. Granite Construction Incorporated | Limbach Holdings vs. Construction Partners | Limbach Holdings vs. Great Lakes Dredge |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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