Correlation Between Energy Services and Dycom Industries

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

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

Diversification Opportunities for Energy Services and Dycom Industries

0.37

Correlation Coefficient

Energy Services  Dycom Industries

Weak diversification

The 3 months correlation between Energy and Dycom is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services and Dycom Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dycom Industries 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 Dycom Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dycom Industries has no effect on the direction of Energy Services i.e., Energy Services and Dycom Industries go up and down completely randomly.

Pair Corralation between Energy Services and Dycom Industries

Given the investment horizon of 90 days Energy Services is expected to under-perform the Dycom Industries. In addition to that, Energy Services is 2.36 times more volatile than Dycom Industries. It trades about -0.16 of its total potential returns per unit of risk. Dycom Industries is currently generating about -0.05 per unit of volatility. If you would invest  14,192  in Dycom Industries on January 26, 2024 and sell it today you would lose (255.00) from holding Dycom Industries or give up 1.8% of portfolio value over 90 days.

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

Energy Services  vs.  Dycom Industries

Energy Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Energy Services sustained solid returns over the last few months and may actually be approaching a breakup point.

Dycom Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dycom Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Dycom Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Services and Dycom Industries

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

The idea behind Energy Services and Dycom Industries 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.