Correlation Between Comfort Systems and Energy Services

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

Diversification Opportunities for Comfort Systems and Energy Services

0.63

Correlation Coefficient

Comfort Systems  Energy Services

Poor diversification

The 3 months correlation between Comfort and Energy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Comfort Systems USA and Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Services 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 Energy Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Services has no effect on the direction of Comfort Systems i.e., Comfort Systems and Energy Services go up and down completely randomly.

Pair Corralation between Comfort Systems and Energy Services

Considering the 90-day investment horizon Comfort Systems USA is expected to under-perform the Energy Services. But the stock apears to be less risky and, when comparing its historical volatility, Comfort Systems USA is 1.41 times less risky than Energy Services. The stock trades about -0.23 of its potential returns per unit of risk. The Energy Services is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,189  in Energy Services on December 1, 2024 and sell it today you would lose (122.00) from holding Energy Services or give up 10.26% of portfolio value over 90 days.

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

Comfort Systems USA  vs.  Energy Services

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.

Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat 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.

Pair Trading with Comfort Systems and Energy Services

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

The idea behind Comfort Systems USA and Energy 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.