Correlation Between Argan and Aecom Technology

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Can any of the company-specific risk be diversified away by investing in both Argan 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 Argan and Aecom Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Argan Inc and Aecom Technology, you can compare the effects of market volatilities on Argan 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 Argan with a short position of Aecom Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argan and Aecom Technology.

Diversification Opportunities for Argan and Aecom Technology

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Argan and Aecom is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Argan Inc and Aecom Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecom Technology and Argan 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 Argan Inc 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 Argan i.e., Argan and Aecom Technology go up and down completely randomly.

Pair Corralation between Argan and Aecom Technology

Considering the 90-day investment horizon Argan is expected to generate 1.08 times less return on investment than Aecom Technology. In addition to that, Argan is 1.14 times more volatile than Aecom Technology. It trades about 0.27 of its total potential returns per unit of risk. Aecom Technology is currently generating about 0.34 per unit of volatility. If you would invest  8,940  in Aecom Technology on December 29, 2023 and sell it today you would earn a total of  791.00  from holding Aecom Technology or generate 8.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Argan Inc  vs.  Aecom Technology

 Performance 
       Timeline  
Argan Inc 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Argan Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Argan may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Aecom Technology 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
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.

Argan and Aecom Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Argan and Aecom Technology

The main advantage of trading using opposite Argan and Aecom Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argan 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 Argan Inc 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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