Correlation Between EMCOR and Dentsu

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

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

Diversification Opportunities for EMCOR and Dentsu

-0.63

Correlation Coefficient

EMCOR  Dentsu

Excellent diversification

The 3 months correlation between EMCOR and Dentsu is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Dentsu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsu Group 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 Dentsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dentsu Group has no effect on the direction of EMCOR i.e., EMCOR and Dentsu go up and down completely randomly.

Pair Corralation between EMCOR and Dentsu

Assuming the 90 days horizon EMCOR Group is expected to generate 1.04 times more return on investment than Dentsu. However, EMCOR is 1.04 times more volatile than Dentsu Group. It trades about 0.12 of its potential returns per unit of risk. Dentsu Group is currently generating about -0.01 per unit of risk. If you would invest  13,798  in EMCOR Group on September 24, 2024 and sell it today you would earn a total of  30,892  from holding EMCOR Group or generate 223.89% return on investment over 90 days.

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

EMCOR Group  vs.  Dentsu Group

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.

Dentsu Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dentsu 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.

Pair Trading with EMCOR and Dentsu

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

The idea behind EMCOR Group and Dentsu 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.