Correlation Between EMCOR and ReTo Eco

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

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

Diversification Opportunities for EMCOR and ReTo Eco

-0.82

Correlation Coefficient

EMCOR  ReTo Eco

Pay attention - limited upside

The 3 months correlation between EMCOR and ReTo is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and ReTo Eco Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReTo Eco Solutions 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 ReTo Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReTo Eco Solutions has no effect on the direction of EMCOR i.e., EMCOR and ReTo Eco go up and down completely randomly.

Pair Corralation between EMCOR and ReTo Eco

Considering the 90-day investment horizon EMCOR Group is expected to generate 0.37 times more return on investment than ReTo Eco. However, EMCOR Group is 2.73 times less risky than ReTo Eco. It trades about 0.08 of its potential returns per unit of risk. ReTo Eco Solutions is currently generating about -0.08 per unit of risk. If you would invest  42,981  in EMCOR Group on September 19, 2024 and sell it today you would earn a total of  3,461  from holding EMCOR Group or generate 8.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

EMCOR Group  vs.  ReTo Eco Solutions

EMCOR Group

Risk-Adjusted Performance

6 of 100

OK

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 fragile primary indicators, EMCOR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ReTo Eco Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReTo Eco Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with EMCOR and ReTo Eco

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

The idea behind EMCOR Group and ReTo Eco Solutions 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.