Correlation Between MYR and Tetra Tech

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

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

Diversification Opportunities for MYR and Tetra Tech

-0.43

Correlation Coefficient

MYR  Tetra Tech

Very good diversification

The 3 months correlation between MYR and Tetra is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding MYR Group and Tetra Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tetra Tech 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 Tetra Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tetra Tech has no effect on the direction of MYR i.e., MYR and Tetra Tech go up and down completely randomly.

Pair Corralation between MYR and Tetra Tech

Given the investment horizon of 90 days MYR Group is expected to generate 1.23 times more return on investment than Tetra Tech. However, MYR is 1.23 times more volatile than Tetra Tech. It trades about 0.3 of its potential returns per unit of risk. Tetra Tech is currently generating about -0.06 per unit of risk. If you would invest  9,419  in MYR Group on September 2, 2024 and sell it today you would earn a total of  6,371  from holding MYR Group or generate 67.64% return on investment over 90 days.

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

MYR Group  vs.  Tetra Tech

MYR Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MYR Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, MYR reported solid returns over the last few months and may actually be approaching a breakup point.

Tetra Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tetra Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with MYR and Tetra Tech

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

The idea behind MYR Group and Tetra Tech 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.