Correlation Between Aecom Technology and Innovate Corp

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

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

Diversification Opportunities for Aecom Technology and Innovate Corp

-0.64

Correlation Coefficient

Aecom Technology  Innovate Corp

Excellent diversification

The 3 months correlation between Aecom and Innovate is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aecom Technology and Innovate Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovate Corp and Aecom Technology 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 Aecom Technology are associated (or correlated) with Innovate Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovate Corp has no effect on the direction of Aecom Technology i.e., Aecom Technology and Innovate Corp go up and down completely randomly.

Pair Corralation between Aecom Technology and Innovate Corp

Considering the 90-day investment horizon Aecom Technology is expected to generate 0.24 times more return on investment than Innovate Corp. However, Aecom Technology is 4.2 times less risky than Innovate Corp. It trades about -0.2 of its potential returns per unit of risk. Innovate Corp is currently generating about -0.32 per unit of risk. If you would invest  9,785  in Aecom Technology on January 28, 2024 and sell it today you would lose (380.00) from holding Aecom Technology or give up 3.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Aecom Technology  vs.  Innovate Corp

Aecom Technology

Risk-Adjusted Performance

6 of 100

Modest

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 latest stock price disarray, may contribute to short-term losses for the investors.

Innovate Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovate Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aecom Technology and Innovate Corp

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

The idea behind Aecom Technology and Innovate Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .