Correlation Between Comfort Systems and Dycom Industries

Can any of the company-specific risk be diversified away by investing in both Comfort Systems and Dycom 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 Dycom 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 Dycom Industries, you can compare the effects of market volatilities on Comfort Systems and Dycom 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 Dycom Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comfort Systems and Dycom Industries.

Diversification Opportunities for Comfort Systems and Dycom Industries

0.86

Correlation Coefficient

Comfort Systems  Dycom Industries

Very poor diversification

The 3 months correlation between Comfort and Dycom is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Comfort Systems USA and Dycom Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dycom 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 Dycom Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dycom Industries has no effect on the direction of Comfort Systems i.e., Comfort Systems and Dycom Industries go up and down completely randomly.

Pair Corralation between Comfort Systems and Dycom Industries

Considering the 90-day investment horizon Comfort Systems USA is expected to under-perform the Dycom Industries. In addition to that, Comfort Systems is 1.72 times more volatile than Dycom Industries. It trades about -0.06 of its total potential returns per unit of risk. Dycom Industries is currently generating about -0.06 per unit of volatility. If you would invest  17,478  in Dycom Industries on December 28, 2024 and sell it today you would lose (2,064) from holding Dycom Industries or give up 11.81% of portfolio value over 90 days.

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

Comfort Systems USA  vs.  Dycom 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.

Dycom Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dycom Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Comfort Systems and Dycom Industries

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

The idea behind Comfort Systems USA and Dycom 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.