Correlation Between EMCOR and Argan

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

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

Diversification Opportunities for EMCOR and Argan

0.85

Correlation Coefficient

EMCOR  Argan

Very poor diversification

The 3 months correlation between EMCOR and Argan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Argan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argan Inc and EMCOR 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 EMCOR Group are associated (or correlated) with Argan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argan Inc has no effect on the direction of EMCOR i.e., EMCOR and Argan go up and down completely randomly.

Pair Corralation between EMCOR and Argan

Considering the 90-day investment horizon EMCOR Group is expected to under-perform the Argan. But the stock apears to be less risky and, when comparing its historical volatility, EMCOR Group is 1.48 times less risky than Argan. The stock trades about -0.1 of its potential returns per unit of risk. The Argan Inc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  17,753  in Argan Inc on January 17, 2025 and sell it today you would lose (2,881) from holding Argan Inc or give up 16.23% of portfolio value over 90 days.

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

EMCOR Group  vs.  Argan Inc

EMCOR Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days EMCOR Group 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 primary indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Argan Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Argan Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental 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 EMCOR and Argan

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

The idea behind EMCOR Group and Argan Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.