Correlation Between AGF Management and EMCOR

Can any of the company-specific risk be diversified away by investing in both AGF Management and EMCOR 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 AGF Management and EMCOR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGF Management Limited and EMCOR Group, you can compare the effects of market volatilities on AGF Management and EMCOR 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 AGF Management with a short position of EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGF Management and EMCOR.

Diversification Opportunities for AGF Management and EMCOR

0.8

Correlation Coefficient

AGF Management  EMCOR

Very poor diversification

The 3 months correlation between AGF and EMCOR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding AGF Management Limited and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and AGF Management 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 AGF Management Limited are associated (or correlated) with EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of AGF Management i.e., AGF Management and EMCOR go up and down completely randomly.

Pair Corralation between AGF Management and EMCOR

Assuming the 90 days horizon AGF Management Limited is expected to generate 0.81 times more return on investment than EMCOR. However, AGF Management Limited is 1.23 times less risky than EMCOR. It trades about -0.28 of its potential returns per unit of risk. EMCOR Group is currently generating about -0.39 per unit of risk. If you would invest  745.00  in AGF Management Limited on September 27, 2024 and sell it today you would lose (45.00) from holding AGF Management Limited or give up 6.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

AGF Management Limited  vs.  EMCOR Group

AGF Management

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGF Management reported solid returns over the last few months and may actually be approaching a breakup point.

EMCOR Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EMCOR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AGF Management and EMCOR

The main advantage of trading using opposite AGF Management and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGF Management position performs unexpectedly, EMCOR 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 EMCOR will offset losses from the drop in EMCOR's long position.

The idea behind AGF Management Limited and EMCOR Group 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.