Correlation Between MYR and Dycom Industries

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

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

Diversification Opportunities for MYR and Dycom Industries

-0.04

Correlation Coefficient

MYR  Dycom Industries

Good diversification

The 3 months correlation between MYR and Dycom is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding MYR Group and Dycom Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dycom Industries and MYR 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 MYR Group are associated (or correlated) with Dycom Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dycom Industries has no effect on the direction of MYR i.e., MYR and Dycom Industries go up and down completely randomly.

Pair Corralation between MYR and Dycom Industries

Given the investment horizon of 90 days MYR Group is expected to under-perform the Dycom Industries. In addition to that, MYR is 1.26 times more volatile than Dycom Industries. It trades about -0.18 of its total potential returns per unit of risk. Dycom Industries is currently generating about -0.14 per unit of volatility. If you would invest  19,474  in Dycom Industries on November 19, 2024 and sell it today you would lose (1,654) from holding Dycom Industries or give up 8.49% of portfolio value over 90 days.

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

MYR Group  vs.  Dycom Industries

MYR Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days MYR Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MYR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Dycom Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dycom Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with MYR and Dycom Industries

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

The idea behind MYR Group and Dycom Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.