Correlation Between Logan Ridge and EMCOR

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

By analyzing existing cross correlation between Logan Ridge Finance and EMCOR Group, you can compare the effects of market volatilities on Logan Ridge and EMCOR 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 Logan Ridge with a short position of EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Logan Ridge and EMCOR.

Diversification Opportunities for Logan Ridge and EMCOR

0.79

Correlation Coefficient

Logan Ridge  EMCOR

Poor diversification

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

Pair Corralation between Logan Ridge and EMCOR

Given the investment horizon of 90 days Logan Ridge is expected to generate 1.82 times less return on investment than EMCOR. But when comparing it to its historical volatility, Logan Ridge Finance is 1.31 times less risky than EMCOR. It trades about 0.07 of its potential returns per unit of risk. EMCOR Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  42,981  in EMCOR Group on September 19, 2024 and sell it today you would earn a total of  4,709  from holding EMCOR Group or generate 10.96% return on investment over 90 days.

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

Logan Ridge Finance  vs.  EMCOR Group

Logan Ridge Finance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Logan Ridge Finance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Logan Ridge is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

EMCOR Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 8 (%) 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.

Pair Trading with Logan Ridge and EMCOR

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

The idea behind Logan Ridge Finance and EMCOR Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.