Correlation Between Montrose Environmental and Quest Resource

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

By analyzing existing cross correlation between Montrose Environmental Grp and Quest Resource Holding, you can compare the effects of market volatilities on Montrose Environmental and Quest Resource 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 Montrose Environmental with a short position of Quest Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montrose Environmental and Quest Resource.

Diversification Opportunities for Montrose Environmental and Quest Resource

0.68

Correlation Coefficient

Montrose Environmental  Quest Resource

Poor diversification

The 3 months correlation between Montrose and Quest is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Montrose Environmental Grp and Quest Resource Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quest Resource Holding and Montrose Environmental 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 Montrose Environmental Grp are associated (or correlated) with Quest Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quest Resource Holding has no effect on the direction of Montrose Environmental i.e., Montrose Environmental and Quest Resource go up and down completely randomly.

Pair Corralation between Montrose Environmental and Quest Resource

Considering the 90-day investment horizon Montrose Environmental Grp is expected to generate 1.12 times more return on investment than Quest Resource. However, Montrose Environmental is 1.12 times more volatile than Quest Resource Holding. It trades about -0.04 of its potential returns per unit of risk. Quest Resource Holding is currently generating about -0.22 per unit of risk. If you would invest  1,900  in Montrose Environmental Grp on December 28, 2024 and sell it today you would lose (418.00) from holding Montrose Environmental Grp or give up 22.0% of portfolio value over 90 days.

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

Montrose Environmental Grp  vs.  Quest Resource Holding

Montrose Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Montrose Environmental Grp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Quest Resource Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quest Resource Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Montrose Environmental and Quest Resource

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

The idea behind Montrose Environmental Grp and Quest Resource Holding 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.