Correlation Between Comfort Systems and NV5 Global

Can any of the company-specific risk be diversified away by investing in both Comfort Systems and NV5 Global 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 NV5 Global 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 NV5 Global, you can compare the effects of market volatilities on Comfort Systems and NV5 Global 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 NV5 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comfort Systems and NV5 Global.

Diversification Opportunities for Comfort Systems and NV5 Global

0.4

Correlation Coefficient

Comfort Systems  NV5 Global

Very weak diversification

The 3 months correlation between Comfort and NV5 is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Comfort Systems USA and NV5 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NV5 Global 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 NV5 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NV5 Global has no effect on the direction of Comfort Systems i.e., Comfort Systems and NV5 Global go up and down completely randomly.

Pair Corralation between Comfort Systems and NV5 Global

Considering the 90-day investment horizon Comfort Systems USA is expected to under-perform the NV5 Global. In addition to that, Comfort Systems is 2.51 times more volatile than NV5 Global. It trades about -0.06 of its total potential returns per unit of risk. NV5 Global is currently generating about 0.03 per unit of volatility. If you would invest  1,894  in NV5 Global on December 27, 2024 and sell it today you would earn a total of  39.00  from holding NV5 Global or generate 2.06% return on investment over 90 days.

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

Comfort Systems USA  vs.  NV5 Global

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.

NV5 Global

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NV5 Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, NV5 Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Comfort Systems and NV5 Global

The main advantage of trading using opposite Comfort Systems and NV5 Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comfort Systems position performs unexpectedly, NV5 Global 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 NV5 Global will offset losses from the drop in NV5 Global's long position.

The idea behind Comfort Systems USA and NV5 Global 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.