Correlation Between ABM Industries and Global Payments

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

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

Diversification Opportunities for ABM Industries and Global Payments

0.52

Correlation Coefficient

ABM Industries  Global Payments

Very weak diversification

The 3 months correlation between ABM and Global is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries Incorporated and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and ABM Industries 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 ABM Industries 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 ABM Industries i.e., ABM Industries and Global Payments go up and down completely randomly.

Pair Corralation between ABM Industries and Global Payments

Considering the 90-day investment horizon ABM Industries Incorporated is expected to generate 1.07 times more return on investment than Global Payments. However, ABM Industries is 1.07 times more volatile than Global Payments. It trades about 0.04 of its potential returns per unit of risk. Global Payments is currently generating about 0.04 per unit of risk. If you would invest  4,575  in ABM Industries Incorporated on August 31, 2024 and sell it today you would earn a total of  1,142  from holding ABM Industries Incorporated or generate 24.96% return on investment over 90 days.

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

ABM Industries Incorporated  vs.  Global Payments

ABM Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ABM Industries Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, ABM Industries is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Global Payments

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with ABM Industries and Global Payments

The main advantage of trading using opposite ABM Industries and Global Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABM Industries 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.

The idea behind ABM Industries Incorporated and Global Payments 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.