Correlation Between ABM Industries and Maximus

Can any of the company-specific risk be diversified away by investing in both ABM Industries and Maximus 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 Maximus 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 Maximus, you can compare the effects of market volatilities on ABM Industries and Maximus 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 Maximus. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABM Industries and Maximus.

Diversification Opportunities for ABM Industries and Maximus

-0.17

Correlation Coefficient

ABM Industries  Maximus

Good diversification

The 3 months correlation between ABM and Maximus is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries Incorporated and Maximus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maximus 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 Maximus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maximus has no effect on the direction of ABM Industries i.e., ABM Industries and Maximus go up and down completely randomly.

Pair Corralation between ABM Industries and Maximus

Considering the 90-day investment horizon ABM Industries Incorporated is expected to generate 0.43 times more return on investment than Maximus. However, ABM Industries Incorporated is 2.32 times less risky than Maximus. It trades about 0.13 of its potential returns per unit of risk. Maximus is currently generating about -0.31 per unit of risk. If you would invest  5,285  in ABM Industries Incorporated on November 29, 2024 and sell it today you would earn a total of  129.00  from holding ABM Industries Incorporated or generate 2.44% return on investment over 90 days.

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

ABM Industries Incorporated  vs.  Maximus

ABM Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days ABM Industries Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, ABM Industries is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Maximus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maximus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with ABM Industries and Maximus

The main advantage of trading using opposite ABM Industries and Maximus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABM Industries position performs unexpectedly, Maximus 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 Maximus will offset losses from the drop in Maximus' long position.

The idea behind ABM Industries Incorporated and Maximus 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.