Correlation Between Aecom Technology and EMCOR

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

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

Diversification Opportunities for Aecom Technology and EMCOR

0.83

Correlation Coefficient

Aecom Technology  EMCOR

Very poor diversification

The 3 months correlation between Aecom and EMCOR is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Aecom Technology and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and Aecom Technology 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 Aecom Technology 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 Aecom Technology i.e., Aecom Technology and EMCOR go up and down completely randomly.

Pair Corralation between Aecom Technology and EMCOR

Considering the 90-day investment horizon Aecom Technology is expected to generate 0.38 times more return on investment than EMCOR. However, Aecom Technology is 2.6 times less risky than EMCOR. It trades about -0.24 of its potential returns per unit of risk. EMCOR Group is currently generating about -0.11 per unit of risk. If you would invest  11,669  in Aecom Technology on November 29, 2024 and sell it today you would lose (1,917) from holding Aecom Technology or give up 16.43% of portfolio value over 90 days.

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

Aecom Technology  vs.  EMCOR Group

Aecom Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aecom Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

EMCOR Group

Risk-Adjusted Performance

Very Weak

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.

Pair Trading with Aecom Technology and EMCOR

The main advantage of trading using opposite Aecom Technology and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aecom Technology 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 Aecom Technology 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.