Correlation Between Quanta Services and Tetra Tech

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

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

Diversification Opportunities for Quanta Services and Tetra Tech

0.89

Correlation Coefficient

Quanta Services  Tetra Tech

Very poor diversification

The 3 months correlation between Quanta and Tetra is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Quanta Services and Tetra Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tetra Tech and Quanta Services 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 Quanta Services 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 Quanta Services i.e., Quanta Services and Tetra Tech go up and down completely randomly.

Pair Corralation between Quanta Services and Tetra Tech

Considering the 90-day investment horizon Quanta Services is expected to generate 1.75 times more return on investment than Tetra Tech. However, Quanta Services is 1.75 times more volatile than Tetra Tech. It trades about -0.09 of its potential returns per unit of risk. Tetra Tech is currently generating about -0.24 per unit of risk. If you would invest  31,888  in Quanta Services on December 28, 2024 and sell it today you would lose (6,400) from holding Quanta Services or give up 20.07% of portfolio value over 90 days.

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

Quanta Services  vs.  Tetra Tech

Quanta Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quanta Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Tetra Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tetra Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Quanta Services and Tetra Tech

The main advantage of trading using opposite Quanta Services and Tetra Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quanta Services 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 Quanta Services 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.

Check out your portfolio center.

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.