Correlation Between China Communications and EMCOR

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

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

Diversification Opportunities for China Communications and EMCOR

0.72

Correlation Coefficient

China Communications  EMCOR

Poor diversification

The 3 months correlation between China and EMCOR is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Construct and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and China Communications 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 China Communications Construction 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 China Communications i.e., China Communications and EMCOR go up and down completely randomly.

Pair Corralation between China Communications and EMCOR

Assuming the 90 days horizon China Communications Construction is expected to generate 2.09 times more return on investment than EMCOR. However, China Communications is 2.09 times more volatile than EMCOR Group. It trades about 0.22 of its potential returns per unit of risk. EMCOR Group is currently generating about 0.2 per unit of risk. If you would invest  33.00  in China Communications Construction on September 12, 2024 and sell it today you would earn a total of  29.00  from holding China Communications Construction or generate 87.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

China Communications Construct  vs.  EMCOR Group

China Communications

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Construction are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Communications reported solid returns over the last few months and may actually be approaching a breakup point.

EMCOR Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EMCOR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Communications and EMCOR

The main advantage of trading using opposite China Communications and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications 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 China Communications Construction 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.