Correlation Between Exponent and Quanta Services

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

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

Diversification Opportunities for Exponent and Quanta Services

-0.19

Correlation Coefficient

Exponent  Quanta Services

Good diversification

The 3 months correlation between Exponent and Quanta is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Exponent and Quanta Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanta Services and Exponent 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 Exponent are associated (or correlated) with Quanta Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanta Services has no effect on the direction of Exponent i.e., Exponent and Quanta Services go up and down completely randomly.

Pair Corralation between Exponent and Quanta Services

Given the investment horizon of 90 days Exponent is expected to under-perform the Quanta Services. But the stock apears to be less risky and, when comparing its historical volatility, Exponent is 1.17 times less risky than Quanta Services. The stock trades about -0.05 of its potential returns per unit of risk. The Quanta Services is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  31,326  in Quanta Services on October 26, 2024 and sell it today you would earn a total of  4,407  from holding Quanta Services or generate 14.07% return on investment over 90 days.

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

Exponent  vs.  Quanta Services

Exponent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exponent is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Quanta Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quanta Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Quanta Services reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exponent and Quanta Services

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

The idea behind Exponent and Quanta 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.