Correlation Between Quanta Services and Dycom Industries

Can any of the company-specific risk be diversified away by investing in both Quanta 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 Quanta 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 Quanta Services and Dycom Industries, you can compare the effects of market volatilities on Quanta 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 Quanta Services with a short position of Dycom Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quanta Services and Dycom Industries.

Diversification Opportunities for Quanta Services and Dycom Industries

0.93

Correlation Coefficient

Quanta Services  Dycom Industries

Almost no diversification

The 3 months correlation between Quanta and Dycom is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Quanta Services and Dycom Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dycom Industries and Quanta 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 Quanta 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 Quanta Services i.e., Quanta Services and Dycom Industries go up and down completely randomly.

Pair Corralation between Quanta Services and Dycom Industries

Considering the 90-day investment horizon Quanta Services is expected to generate 1.02 times more return on investment than Dycom Industries. However, Quanta Services is 1.02 times more volatile than Dycom Industries. It trades about 0.03 of its potential returns per unit of risk. Dycom Industries is currently generating about -0.01 per unit of risk. If you would invest  25,971  in Quanta Services on January 28, 2024 and sell it today you would earn a total of  195.00  from holding Quanta Services or generate 0.75% return on investment over 90 days.

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

Quanta Services  vs.  Dycom Industries

Quanta Services

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quanta Services are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Quanta Services reported solid returns over the last few months and may actually be approaching a breakup point.

Dycom Industries

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dycom Industries are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Dycom Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quanta Services and Dycom Industries

The main advantage of trading using opposite Quanta Services and Dycom Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quanta 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 Quanta 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.