Correlation Between EMCOR and STELLA-JONES INC

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

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

Diversification Opportunities for EMCOR and STELLA-JONES INC

0.49

Correlation Coefficient

EMCOR  STELLA-JONES INC

Very weak diversification

The 3 months correlation between EMCOR and STELLA-JONES is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and STELLA JONES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STELLA JONES INC and EMCOR 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 EMCOR Group are associated (or correlated) with STELLA-JONES INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STELLA JONES INC has no effect on the direction of EMCOR i.e., EMCOR and STELLA-JONES INC go up and down completely randomly.

Pair Corralation between EMCOR and STELLA-JONES INC

Assuming the 90 days horizon EMCOR Group is expected to under-perform the STELLA-JONES INC. In addition to that, EMCOR is 1.67 times more volatile than STELLA JONES INC. It trades about -0.05 of its total potential returns per unit of risk. STELLA JONES INC is currently generating about -0.07 per unit of volatility. If you would invest  4,720  in STELLA JONES INC on December 26, 2024 and sell it today you would lose (460.00) from holding STELLA JONES INC or give up 9.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

EMCOR Group  vs.  STELLA JONES INC

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

STELLA JONES INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days STELLA JONES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with EMCOR and STELLA-JONES INC

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

The idea behind EMCOR Group and STELLA JONES INC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.