Correlation Between SNC Lavalin and Comfort Systems

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

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

Diversification Opportunities for SNC Lavalin and Comfort Systems

0.71

Correlation Coefficient

SNC Lavalin  Comfort Systems

Poor diversification

The 3 months correlation between SNC and Comfort is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SNC Lavalin Group and Comfort Systems USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comfort Systems USA and SNC Lavalin 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 SNC Lavalin Group are associated (or correlated) with Comfort Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comfort Systems USA has no effect on the direction of SNC Lavalin i.e., SNC Lavalin and Comfort Systems go up and down completely randomly.

Pair Corralation between SNC Lavalin and Comfort Systems

Assuming the 90 days horizon SNC Lavalin is expected to generate 1.76 times less return on investment than Comfort Systems. In addition to that, SNC Lavalin is 1.07 times more volatile than Comfort Systems USA. It trades about 0.12 of its total potential returns per unit of risk. Comfort Systems USA is currently generating about 0.23 per unit of volatility. If you would invest  38,899  in Comfort Systems USA on October 26, 2024 and sell it today you would earn a total of  15,462  from holding Comfort Systems USA or generate 39.75% return on investment over 90 days.

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

SNC Lavalin Group  vs.  Comfort Systems USA

SNC Lavalin Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SNC Lavalin Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SNC Lavalin reported solid returns over the last few months and may actually be approaching a breakup point.

Comfort Systems USA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Comfort Systems USA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Comfort Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SNC Lavalin and Comfort Systems

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

The idea behind SNC Lavalin Group and Comfort Systems USA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.