Correlation Between ChampionX and EMCOR

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

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

Diversification Opportunities for ChampionX and EMCOR

0.1

Correlation Coefficient

ChampionX  EMCOR

Average diversification

The 3 months correlation between ChampionX and EMCOR is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding ChampionX and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and ChampionX 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 ChampionX 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 ChampionX i.e., ChampionX and EMCOR go up and down completely randomly.

Pair Corralation between ChampionX and EMCOR

Considering the 90-day investment horizon ChampionX is expected to under-perform the EMCOR. In addition to that, ChampionX is 1.16 times more volatile than EMCOR Group. It trades about -0.08 of its total potential returns per unit of risk. EMCOR Group is currently generating about 0.08 per unit of volatility. If you would invest  42,906  in EMCOR Group on September 26, 2024 and sell it today you would earn a total of  3,443  from holding EMCOR Group or generate 8.02% return on investment over 90 days.

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

ChampionX  vs.  EMCOR Group

ChampionX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChampionX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical 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

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, EMCOR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ChampionX and EMCOR

The main advantage of trading using opposite ChampionX and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChampionX 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 ChampionX 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.