Correlation Between Great Lakes and Matrix Service

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

By analyzing existing cross correlation between Great Lakes Dredge and Matrix Service Co, you can compare the effects of market volatilities on Great Lakes and Matrix Service 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 Great Lakes with a short position of Matrix Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Lakes and Matrix Service.

Diversification Opportunities for Great Lakes and Matrix Service

0.63

Correlation Coefficient

Great Lakes  Matrix Service

Poor diversification

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

Pair Corralation between Great Lakes and Matrix Service

Given the investment horizon of 90 days Great Lakes is expected to generate 1.27 times less return on investment than Matrix Service. But when comparing it to its historical volatility, Great Lakes Dredge is 1.56 times less risky than Matrix Service. It trades about 0.37 of its potential returns per unit of risk. Matrix Service Co is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,090  in Matrix Service Co on February 8, 2025 and sell it today you would earn a total of  275.00  from holding Matrix Service Co or generate 25.23% return on investment over 90 days.

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

Great Lakes Dredge  vs.  Matrix Service Co

Great Lakes Dredge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great Lakes Dredge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Great Lakes is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Matrix Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matrix Service Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Matrix Service is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Great Lakes and Matrix Service

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

The idea behind Great Lakes Dredge and Matrix Service Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.