Correlation Between Stantec and Comfort Systems

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

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

Diversification Opportunities for Stantec and Comfort Systems

0.49

Correlation Coefficient

Stantec  Comfort Systems

Very weak diversification

The 3 months correlation between Stantec and Comfort is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Stantec 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 Stantec 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 Stantec 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 Stantec i.e., Stantec and Comfort Systems go up and down completely randomly.

Pair Corralation between Stantec and Comfort Systems

Considering the 90-day investment horizon Stantec is expected to generate 0.73 times more return on investment than Comfort Systems. However, Stantec is 1.36 times less risky than Comfort Systems. It trades about 0.13 of its potential returns per unit of risk. Comfort Systems USA is currently generating about -0.11 per unit of risk. If you would invest  7,883  in Stantec on November 28, 2024 and sell it today you would earn a total of  491.00  from holding Stantec or generate 6.23% return on investment over 90 days.

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

Stantec  vs.  Comfort Systems USA

Stantec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stantec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Stantec is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Comfort Systems USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Comfort Systems USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Stantec and Comfort Systems

The main advantage of trading using opposite Stantec and Comfort Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stantec 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 Stantec 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.