Correlation Between EMCOR and Arcosa

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

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

Diversification Opportunities for EMCOR and Arcosa

0.96

Correlation Coefficient

EMCOR  Arcosa

Almost no diversification

The 3 months correlation between EMCOR and Arcosa is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Arcosa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcosa 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 Arcosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcosa Inc has no effect on the direction of EMCOR i.e., EMCOR and Arcosa go up and down completely randomly.

Pair Corralation between EMCOR and Arcosa

Considering the 90-day investment horizon EMCOR Group is expected to generate 1.05 times more return on investment than Arcosa. However, EMCOR is 1.05 times more volatile than Arcosa Inc. It trades about 0.3 of its potential returns per unit of risk. Arcosa Inc is currently generating about 0.27 per unit of risk. If you would invest  37,105  in EMCOR Group on September 10, 2024 and sell it today you would earn a total of  13,798  from holding EMCOR Group or generate 37.19% return on investment over 90 days.

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

EMCOR Group  vs.  Arcosa Inc

EMCOR Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, EMCOR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Arcosa Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arcosa Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Arcosa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMCOR and Arcosa

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

The idea behind EMCOR Group and Arcosa 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.