Correlation Between IAA and ABM Industries

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

By analyzing existing cross correlation between IAA Inc and ABM Industries Incorporated, you can compare the effects of market volatilities on IAA and ABM 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 IAA with a short position of ABM Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAA and ABM Industries.

Diversification Opportunities for IAA and ABM Industries

0.08

Correlation Coefficient

IAA  ABM Industries

Significant diversification

The 3 months correlation between IAA and ABM is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding IAA Inc and ABM Industries Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABM Industries rporated and IAA 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 IAA Inc are associated (or correlated) with ABM Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABM Industries rporated has no effect on the direction of IAA i.e., IAA and ABM Industries go up and down completely randomly.

Pair Corralation between IAA and ABM Industries

If you would invest  4,356  in ABM Industries Incorporated on January 24, 2024 and sell it today you would earn a total of  90.00  from holding ABM Industries Incorporated or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

IAA Inc  vs.  ABM Industries Incorporated

IAA Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IAA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ABM Industries rporated

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ABM Industries Incorporated are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental drivers, ABM Industries may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with IAA and ABM Industries

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

The idea behind IAA Inc and ABM Industries Incorporated 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 CEOs Directory module to screen CEOs from public companies around the world.