Correlation Between Primoris Services and EMCOR

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

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

Diversification Opportunities for Primoris Services and EMCOR

0.86

Correlation Coefficient

Primoris Services  EMCOR

Very poor diversification

The 3 months correlation between Primoris and EMCOR is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Primoris Services and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and Primoris 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 Primoris Services 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 Primoris Services i.e., Primoris Services and EMCOR go up and down completely randomly.

Pair Corralation between Primoris Services and EMCOR

Given the investment horizon of 90 days Primoris Services is expected to generate 1.0 times less return on investment than EMCOR. In addition to that, Primoris Services is 1.18 times more volatile than EMCOR Group. It trades about 0.38 of its total potential returns per unit of risk. EMCOR Group is currently generating about 0.45 per unit of volatility. If you would invest  38,507  in EMCOR Group on July 13, 2024 and sell it today you would earn a total of  5,702  from holding EMCOR Group or generate 14.81% return on investment over 90 days.

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

Primoris Services  vs.  EMCOR Group

Primoris Services

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Primoris Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Primoris Services displayed solid returns over the last few months and may actually be approaching a breakup point.

EMCOR Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, EMCOR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Primoris Services and EMCOR

The main advantage of trading using opposite Primoris Services and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primoris Services 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 Primoris Services 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.