Correlation Between Gamma Communications and AECOM TECHNOLOGY

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

By analyzing existing cross correlation between Gamma Communications plc and AECOM TECHNOLOGY, you can compare the effects of market volatilities on Gamma Communications 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 Gamma Communications with a short position of AECOM TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and AECOM TECHNOLOGY.

Diversification Opportunities for Gamma Communications and AECOM TECHNOLOGY

-0.48

Correlation Coefficient

Gamma Communications  AECOM TECHNOLOGY

Very good diversification

The 3 months correlation between Gamma and AECOM is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and AECOM TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM TECHNOLOGY and Gamma Communications 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 Gamma Communications plc 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 Gamma Communications i.e., Gamma Communications and AECOM TECHNOLOGY go up and down completely randomly.

Pair Corralation between Gamma Communications and AECOM TECHNOLOGY

Assuming the 90 days horizon Gamma Communications plc is expected to under-perform the AECOM TECHNOLOGY. But the stock apears to be less risky and, when comparing its historical volatility, Gamma Communications plc is 1.16 times less risky than AECOM TECHNOLOGY. The stock trades about -0.08 of its potential returns per unit of risk. The AECOM TECHNOLOGY is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,426  in AECOM TECHNOLOGY on October 5, 2024 and sell it today you would earn a total of  874.00  from holding AECOM TECHNOLOGY or generate 9.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gamma Communications plc  vs.  AECOM TECHNOLOGY

Gamma Communications plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AECOM TECHNOLOGY

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days AECOM TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, AECOM TECHNOLOGY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gamma Communications and AECOM TECHNOLOGY

The main advantage of trading using opposite Gamma Communications and AECOM TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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 Gamma Communications plc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.