Correlation Between EMCOR and Afentra PLC

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

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

Diversification Opportunities for EMCOR and Afentra PLC

0.75

Correlation Coefficient

EMCOR  Afentra PLC

Poor diversification

The 3 months correlation between EMCOR and Afentra is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Afentra PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afentra PLC 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 Afentra PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afentra PLC has no effect on the direction of EMCOR i.e., EMCOR and Afentra PLC go up and down completely randomly.

Pair Corralation between EMCOR and Afentra PLC

If you would invest  35,327  in EMCOR Group on September 5, 2024 and sell it today you would earn a total of  15,632  from holding EMCOR Group or generate 44.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

EMCOR Group  vs.  Afentra PLC

EMCOR Group

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, EMCOR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Afentra PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afentra PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Afentra PLC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EMCOR and Afentra PLC

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

The idea behind EMCOR Group and Afentra PLC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.