Correlation Between LENSAR and EMCOR

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

By analyzing existing cross correlation between LENSAR Inc and EMCOR Group, you can compare the effects of market volatilities on LENSAR and EMCOR 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 LENSAR with a short position of EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENSAR and EMCOR.

Diversification Opportunities for LENSAR and EMCOR

0.44

Correlation Coefficient

LENSAR  EMCOR

Very weak diversification

The 3 months correlation between LENSAR and EMCOR is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and LENSAR 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 LENSAR Inc are associated (or correlated) with EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of LENSAR i.e., LENSAR and EMCOR go up and down completely randomly.

Pair Corralation between LENSAR and EMCOR

Given the investment horizon of 90 days LENSAR Inc is expected to under-perform the EMCOR. In addition to that, LENSAR is 1.7 times more volatile than EMCOR Group. It trades about -0.05 of its total potential returns per unit of risk. EMCOR Group is currently generating about 0.27 per unit of volatility. If you would invest  46,303  in EMCOR Group on October 22, 2024 and sell it today you would earn a total of  4,344  from holding EMCOR Group or generate 9.38% return on investment over 90 days.

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

LENSAR Inc  vs.  EMCOR Group

LENSAR Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

EMCOR Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, EMCOR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LENSAR and EMCOR

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

The idea behind LENSAR Inc and EMCOR Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.