Correlation Between EMCOR and IES Holdings

Can any of the company-specific risk be diversified away by investing in both EMCOR and IES 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 IES 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 IES Holdings, you can compare the effects of market volatilities on EMCOR and IES 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 IES Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and IES Holdings.

Diversification Opportunities for EMCOR and IES Holdings

0.93

Correlation Coefficient

EMCOR  IES Holdings

Almost no diversification

The 3 months correlation between EMCOR and IES is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and IES Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IES 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 IES Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IES Holdings has no effect on the direction of EMCOR i.e., EMCOR and IES Holdings go up and down completely randomly.

Pair Corralation between EMCOR and IES Holdings

Considering the 90-day investment horizon EMCOR Group is expected to under-perform the IES Holdings. But the stock apears to be less risky and, when comparing its historical volatility, EMCOR Group is 1.57 times less risky than IES Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The IES Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  21,052  in IES Holdings on December 27, 2024 and sell it today you would lose (3,165) from holding IES Holdings or give up 15.03% of portfolio value over 90 days.

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

EMCOR Group  vs.  IES 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.

IES Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days IES Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with EMCOR and IES Holdings

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

The idea behind EMCOR Group and IES 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.