Correlation Between AZZ Incorporated and Global Payments
Can any of the company-specific risk be diversified away by investing in both AZZ Incorporated and Global Payments 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 AZZ Incorporated and Global Payments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AZZ Incorporated and Global Payments, you can compare the effects of market volatilities on AZZ Incorporated and Global Payments 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 AZZ Incorporated with a short position of Global Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of AZZ Incorporated and Global Payments.
Diversification Opportunities for AZZ Incorporated and Global Payments
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AZZ and Global is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding AZZ Incorporated and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and AZZ Incorporated 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 AZZ Incorporated are associated (or correlated) with Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of AZZ Incorporated i.e., AZZ Incorporated and Global Payments go up and down completely randomly.
Pair Corralation between AZZ Incorporated and Global Payments
Considering the 90-day investment horizon AZZ Incorporated is expected to generate 1.51 times less return on investment than Global Payments. In addition to that, AZZ Incorporated is 1.41 times more volatile than Global Payments. It trades about 0.05 of its total potential returns per unit of risk. Global Payments is currently generating about 0.1 per unit of volatility. If you would invest 9,745 in Global Payments on November 1, 2024 and sell it today you would earn a total of 1,287 from holding Global Payments or generate 13.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AZZ Incorporated vs. Global Payments
Performance |
| Timeline |
| AZZ Incorporated |
| Global Payments |
AZZ Incorporated and Global Payments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AZZ Incorporated and Global Payments
The main advantage of trading using opposite AZZ Incorporated and Global Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AZZ Incorporated position performs unexpectedly, Global Payments 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 Global Payments will offset losses from the drop in Global Payments' long position.| AZZ Incorporated vs. Maximus | AZZ Incorporated vs. ABM Industries Incorporated | AZZ Incorporated vs. CBIZ Inc | AZZ Incorporated vs. Cass Information Systems |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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