Correlation Between ABB and Aecom Technology

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

By analyzing existing cross correlation between ABB Ltd ADR and Aecom Technology, you can compare the effects of market volatilities on ABB and Aecom Technology 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 ABB with a short position of Aecom Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB and Aecom Technology.

Diversification Opportunities for ABB and Aecom Technology

0.8

Correlation Coefficient

ABB  Aecom Technology

Very poor diversification

The 3 months correlation between ABB and Aecom is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ABB Ltd ADR and Aecom Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecom Technology and ABB 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 ABB Ltd ADR are associated (or correlated) with Aecom Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aecom Technology has no effect on the direction of ABB i.e., ABB and Aecom Technology go up and down completely randomly.

Pair Corralation between ABB and Aecom Technology

If you would invest  3,900  in ABB Ltd ADR on January 26, 2024 and sell it today you would earn a total of  0.00  from holding ABB Ltd ADR or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.76%
Values	Daily Returns

ABB Ltd ADR  vs.  Aecom Technology

ABB Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABB Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, ABB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Aecom Technology

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aecom Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Aecom Technology is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ABB and Aecom Technology

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

The idea behind ABB Ltd ADR and Aecom Technology 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.