Correlation Between EMCOR and Logan Ridge
Can any of the company-specific risk be diversified away by investing in both EMCOR and Logan Ridge 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 Logan Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Logan Ridge Finance, you can compare the effects of market volatilities on EMCOR and Logan Ridge 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 Logan Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Logan Ridge.
Diversification Opportunities for EMCOR and Logan Ridge
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EMCOR and Logan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Logan Ridge Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logan Ridge Finance 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 Logan Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logan Ridge Finance has no effect on the direction of EMCOR i.e., EMCOR and Logan Ridge go up and down completely randomly.
Pair Corralation between EMCOR and Logan Ridge
Considering the 90-day investment horizon EMCOR Group is expected to generate 1.64 times more return on investment than Logan Ridge. However, EMCOR is 1.64 times more volatile than Logan Ridge Finance. It trades about 0.13 of its potential returns per unit of risk. Logan Ridge Finance is currently generating about 0.04 per unit of risk. If you would invest 14,712 in EMCOR Group on September 20, 2024 and sell it today you would earn a total of 31,718 from holding EMCOR Group or generate 215.59% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
EMCOR Group vs. Logan Ridge Finance
Performance |
Timeline |
EMCOR Group |
Logan Ridge Finance |
EMCOR and Logan Ridge Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EMCOR and Logan Ridge
The main advantage of trading using opposite EMCOR and Logan Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Logan Ridge 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 Logan Ridge will offset losses from the drop in Logan Ridge's long position.The idea behind EMCOR Group and Logan Ridge Finance 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.Check out your portfolio center.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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