Correlation Between Comfort Systems and ENGlobal

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

Diversification Opportunities for Comfort Systems and ENGlobal

0.06

Correlation Coefficient

Comfort Systems  ENGlobal

Significant diversification

The 3 months correlation between Comfort and ENGlobal is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Comfort Systems USA and ENGlobal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGlobal 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 ENGlobal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGlobal has no effect on the direction of Comfort Systems i.e., Comfort Systems and ENGlobal go up and down completely randomly.

Pair Corralation between Comfort Systems and ENGlobal

Considering the 90-day investment horizon Comfort Systems USA is expected to generate 0.47 times more return on investment than ENGlobal. However, Comfort Systems USA is 2.14 times less risky than ENGlobal. It trades about 0.29 of its potential returns per unit of risk. ENGlobal is currently generating about -0.02 per unit of risk. If you would invest  31,457  in Comfort Systems USA on September 3, 2024 and sell it today you would earn a total of  17,870  from holding Comfort Systems USA or generate 56.81% return on investment over 90 days.

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

Comfort Systems USA  vs.  ENGlobal

Comfort Systems USA

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Comfort Systems USA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Comfort Systems showed solid returns over the last few months and may actually be approaching a breakup point.

ENGlobal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENGlobal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Comfort Systems and ENGlobal

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

The idea behind Comfort Systems USA and ENGlobal 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.