Correlation Between Energy Services and Primoris Services

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

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

Diversification Opportunities for Energy Services and Primoris Services

0.85

Correlation Coefficient

Energy Services  Primoris Services

Very poor diversification

The 3 months correlation between Energy and Primoris is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services and Primoris Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primoris Services and Energy Services 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 Energy Services 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 Energy Services i.e., Energy Services and Primoris Services go up and down completely randomly.

Pair Corralation between Energy Services and Primoris Services

Given the investment horizon of 90 days Energy Services is expected to under-perform the Primoris Services. In addition to that, Energy Services is 1.97 times more volatile than Primoris Services. It trades about -0.66 of its total potential returns per unit of risk. Primoris Services is currently generating about -0.14 per unit of volatility. If you would invest  8,177  in Primoris Services on October 15, 2024 and sell it today you would lose (423.00) from holding Primoris Services or give up 5.17% of portfolio value over 90 days.

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

Energy Services  vs.  Primoris Services

Energy Services

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Energy Services sustained solid returns over the last few months and may actually be approaching a breakup point.

Primoris Services

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primoris Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Primoris Services displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Services and Primoris Services

The main advantage of trading using opposite Energy Services and Primoris Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services 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 Energy Services 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.