Correlation Between Energy Services and MasTec

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

By analyzing existing cross correlation between Energy Services and MasTec Inc, you can compare the effects of market volatilities on Energy Services and MasTec 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 Energy Services with a short position of MasTec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and MasTec.

Diversification Opportunities for Energy Services and MasTec

0.79

Correlation Coefficient

Energy Services  MasTec

Poor diversification

The 3 months correlation between Energy and MasTec is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services and MasTec Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MasTec Inc and Energy Services 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 Energy Services are associated (or correlated) with MasTec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MasTec Inc has no effect on the direction of Energy Services i.e., Energy Services and MasTec go up and down completely randomly.

Pair Corralation between Energy Services and MasTec

Given the investment horizon of 90 days Energy Services is expected to generate 2.61 times more return on investment than MasTec. However, Energy Services is 2.61 times more volatile than MasTec Inc. It trades about 0.08 of its potential returns per unit of risk. MasTec Inc is currently generating about -0.07 per unit of risk. If you would invest  1,503  in Energy Services on September 22, 2024 and sell it today you would earn a total of  97.00  from holding Energy Services or generate 6.45% return on investment over 90 days.

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

Energy Services  vs.  MasTec Inc

Energy Services

Risk-Adjusted Performance

15 of 100

Good

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

MasTec Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MasTec Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MasTec may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Energy Services and MasTec

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

The idea behind Energy Services and MasTec 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.