Correlation Between Boyd Gaming and EMCOR

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

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

Diversification Opportunities for Boyd Gaming and EMCOR

0.77

Correlation Coefficient

Boyd Gaming  EMCOR

Poor diversification

The 3 months correlation between Boyd and EMCOR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and Boyd Gaming 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 Boyd Gaming 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 Boyd Gaming i.e., Boyd Gaming and EMCOR go up and down completely randomly.

Pair Corralation between Boyd Gaming and EMCOR

Assuming the 90 days trading horizon Boyd Gaming is expected to generate 1.61 times less return on investment than EMCOR. But when comparing it to its historical volatility, Boyd Gaming is 1.71 times less risky than EMCOR. It trades about 0.3 of its potential returns per unit of risk. EMCOR Group is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  44,117  in EMCOR Group on October 23, 2024 and sell it today you would earn a total of  4,783  from holding EMCOR Group or generate 10.84% return on investment over 90 days.

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

Boyd Gaming  vs.  EMCOR Group

Boyd Gaming

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Gaming are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Boyd Gaming unveiled solid returns over the last few months and may actually be approaching a breakup point.

EMCOR Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 9 (%) 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 Boyd Gaming and EMCOR

The main advantage of trading using opposite Boyd Gaming and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boyd Gaming 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 Boyd Gaming 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.