Correlation Between EMCOR and Primoris Services

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

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

Diversification Opportunities for EMCOR and Primoris Services

0.93

Correlation Coefficient

EMCOR  Primoris Services

Almost no diversification

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

Pair Corralation between EMCOR and Primoris Services

Considering the 90-day investment horizon EMCOR Group is expected to under-perform the Primoris Services. But the stock apears to be less risky and, when comparing its historical volatility, EMCOR Group is 1.5 times less risky than Primoris Services. The stock trades about -0.21 of its potential returns per unit of risk. The Primoris Services is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,227  in Primoris Services on November 29, 2024 and sell it today you would lose (176.00) from holding Primoris Services or give up 2.44% 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.  Primoris Services

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 fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Primoris Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Primoris Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with EMCOR and Primoris Services

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

The idea behind EMCOR Group and Primoris Services 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.