Correlation Between EMCOR and Biglari Holdings

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

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

Diversification Opportunities for EMCOR and Biglari Holdings

0.24

Correlation Coefficient

EMCOR  Biglari Holdings

Modest diversification

The 3 months correlation between EMCOR and Biglari is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings 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 Biglari Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biglari Holdings has no effect on the direction of EMCOR i.e., EMCOR and Biglari Holdings go up and down completely randomly.

Pair Corralation between EMCOR and Biglari Holdings

Considering the 90-day investment horizon EMCOR Group is expected to generate 1.4 times more return on investment than Biglari Holdings. However, EMCOR is 1.4 times more volatile than Biglari Holdings. It trades about -0.04 of its potential returns per unit of risk. Biglari Holdings is currently generating about -0.14 per unit of risk. If you would invest  46,635  in EMCOR Group on December 26, 2024 and sell it today you would lose (5,407) from holding EMCOR Group or give up 11.59% of portfolio value over 90 days.

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

EMCOR Group  vs.  Biglari Holdings

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 latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Biglari Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biglari Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with EMCOR and Biglari Holdings

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

The idea behind EMCOR Group and Biglari Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.