Correlation Between Comfort Systems and Cavco Industries

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

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

Diversification Opportunities for Comfort Systems and Cavco Industries

-0.47

Correlation Coefficient

Comfort Systems  Cavco Industries

Very good diversification

The 3 months correlation between Comfort and Cavco is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Comfort Systems USA and Cavco Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavco Industries and Comfort Systems 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 Comfort Systems USA are associated (or correlated) with Cavco Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavco Industries has no effect on the direction of Comfort Systems i.e., Comfort Systems and Cavco Industries go up and down completely randomly.

Pair Corralation between Comfort Systems and Cavco Industries

Considering the 90-day investment horizon Comfort Systems USA is expected to under-perform the Cavco Industries. In addition to that, Comfort Systems is 2.49 times more volatile than Cavco Industries. It trades about -0.06 of its total potential returns per unit of risk. Cavco Industries is currently generating about 0.15 per unit of volatility. If you would invest  44,683  in Cavco Industries on December 28, 2024 and sell it today you would earn a total of  7,972  from holding Cavco Industries or generate 17.84% return on investment over 90 days.

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

Comfort Systems USA  vs.  Cavco Industries

Comfort Systems USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Comfort Systems USA 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 fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cavco Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cavco Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cavco Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Comfort Systems and Cavco Industries

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

The idea behind Comfort Systems USA and Cavco Industries 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.