Correlation Between Albemarle and Primoris Services

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

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

Diversification Opportunities for Albemarle and Primoris Services

0.69

Correlation Coefficient

Albemarle  Primoris Services

Poor diversification

The 3 months correlation between Albemarle and Primoris is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and Primoris Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primoris Services and Albemarle 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 Albemarle are associated (or correlated) with Primoris Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primoris Services has no effect on the direction of Albemarle i.e., Albemarle and Primoris Services go up and down completely randomly.

Pair Corralation between Albemarle and Primoris Services

Assuming the 90 days trading horizon Albemarle is expected to generate 0.57 times more return on investment than Primoris Services. However, Albemarle is 1.76 times less risky than Primoris Services. It trades about -0.04 of its potential returns per unit of risk. Primoris Services is currently generating about -0.08 per unit of risk. If you would invest  4,096  in Albemarle on December 22, 2024 and sell it today you would lose (291.00) from holding Albemarle or give up 7.1% of portfolio value over 90 days.

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

Albemarle  vs.  Primoris Services

Albemarle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Albemarle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Albemarle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Primoris Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Primoris Services 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 forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Albemarle and Primoris Services

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

The idea behind Albemarle and Primoris Services 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .