Correlation Between EMCOR and Sandstorm Gold

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

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

Diversification Opportunities for EMCOR and Sandstorm Gold

-0.63

Correlation Coefficient

EMCOR  Sandstorm Gold

Excellent diversification

The 3 months correlation between EMCOR and Sandstorm is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold 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 Sandstorm Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandstorm Gold has no effect on the direction of EMCOR i.e., EMCOR and Sandstorm Gold go up and down completely randomly.

Pair Corralation between EMCOR and Sandstorm Gold

Considering the 90-day investment horizon EMCOR Group is expected to generate 0.81 times more return on investment than Sandstorm Gold. However, EMCOR Group is 1.24 times less risky than Sandstorm Gold. It trades about 0.14 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about 0.01 per unit of risk. If you would invest  14,908  in EMCOR Group on September 14, 2024 and sell it today you would earn a total of  33,117  from holding EMCOR Group or generate 222.14% return on investment over 90 days.

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

EMCOR Group  vs.  Sandstorm Gold Ltd

EMCOR Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, EMCOR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sandstorm Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandstorm Gold Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with EMCOR and Sandstorm Gold

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

The idea behind EMCOR Group and Sandstorm Gold Ltd 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .