Correlation Between Matrix Service and EMCOR

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

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

Diversification Opportunities for Matrix Service and EMCOR

0.79

Correlation Coefficient

Matrix Service  EMCOR

Poor diversification

The 3 months correlation between Matrix and EMCOR is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Matrix Service Co and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and Matrix Service 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 Matrix Service Co are associated (or correlated) with EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of Matrix Service i.e., Matrix Service and EMCOR go up and down completely randomly.

Pair Corralation between Matrix Service and EMCOR

Given the investment horizon of 90 days Matrix Service Co is expected to under-perform the EMCOR. In addition to that, Matrix Service is 1.19 times more volatile than EMCOR Group. It trades about -0.05 of its total potential returns per unit of risk. EMCOR Group is currently generating about -0.02 per unit of volatility. If you would invest  43,912  in EMCOR Group on January 29, 2025 and sell it today you would lose (2,610) from holding EMCOR Group or give up 5.94% of portfolio value over 90 days.

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

Matrix Service Co  vs.  EMCOR Group

Matrix Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matrix Service Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 rather sound primary indicators, EMCOR is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Matrix Service and EMCOR

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

The idea behind Matrix Service Co and EMCOR Group 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.