Correlation Between Primoris Services and Aecom Technology

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

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

Diversification Opportunities for Primoris Services and Aecom Technology

0.16

Correlation Coefficient

Primoris Services  Aecom Technology

Average diversification

The 3 months correlation between Primoris and Aecom is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Primoris Services and Aecom Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecom Technology and Primoris Services 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 Primoris Services 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 Primoris Services i.e., Primoris Services and Aecom Technology go up and down completely randomly.

Pair Corralation between Primoris Services and Aecom Technology

Given the investment horizon of 90 days Primoris Services is expected to generate 1.52 times more return on investment than Aecom Technology. However, Primoris Services is 1.52 times more volatile than Aecom Technology. It trades about 0.14 of its potential returns per unit of risk. Aecom Technology is currently generating about 0.06 per unit of risk. If you would invest  2,749  in Primoris Services on February 23, 2024 and sell it today you would earn a total of  2,519  from holding Primoris Services or generate 91.63% return on investment over 90 days.

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

Primoris Services  vs.  Aecom Technology

Primoris Services

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Primoris Services are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward indicators, Primoris Services displayed solid returns over the last few months and may actually be approaching a breakup point.

Aecom Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aecom Technology has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Primoris Services and Aecom Technology

The main advantage of trading using opposite Primoris Services and Aecom Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primoris Services 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 Primoris Services 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.