Correlation Between Big Yellow and AECOM
Can any of the company-specific risk be diversified away by investing in both Big Yellow and AECOM 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 Big Yellow and AECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Yellow Group and AECOM, you can compare the effects of market volatilities on Big Yellow and AECOM 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 Big Yellow with a short position of AECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Yellow and AECOM.
Diversification Opportunities for Big Yellow and AECOM
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Big and AECOM is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Big Yellow Group and AECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM and Big Yellow 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 Big Yellow Group are associated (or correlated) with AECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM has no effect on the direction of Big Yellow i.e., Big Yellow and AECOM go up and down completely randomly.
Pair Corralation between Big Yellow and AECOM
Assuming the 90 days horizon Big Yellow is expected to generate 7.08 times less return on investment than AECOM. But when comparing it to its historical volatility, Big Yellow Group is 1.23 times less risky than AECOM. It trades about 0.01 of its potential returns per unit of risk. AECOM is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,617 in AECOM on August 31, 2024 and sell it today you would earn a total of 3,383 from holding AECOM or generate 44.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big Yellow Group vs. AECOM
Performance |
| Timeline |
| Big Yellow Group |
| AECOM |
Big Yellow and AECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Yellow and AECOM
The main advantage of trading using opposite Big Yellow and AECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Yellow position performs unexpectedly, AECOM 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 will offset losses from the drop in AECOM's long position.| Big Yellow vs. Sims Metal Management | Big Yellow vs. Playa Hotels Resorts | Big Yellow vs. Coor Service Management | Big Yellow vs. Perdoceo Education |
| AECOM vs. MeVis Medical Solutions | AECOM vs. SAFETY MEDICAL PROD | AECOM vs. TreeHouse Foods | AECOM vs. Performance Food Group |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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