Correlation Between ABM Industries and Performant Financial

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

Diversification Opportunities for ABM Industries and Performant Financial

-0.55

Correlation Coefficient

ABM Industries  Performant Financial

Excellent diversification

The 3 months correlation between ABM and Performant is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries Incorporated and Performant Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performant Financial 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 Performant Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performant Financial has no effect on the direction of ABM Industries i.e., ABM Industries and Performant Financial go up and down completely randomly.

Pair Corralation between ABM Industries and Performant Financial

Considering the 90-day investment horizon ABM Industries Incorporated is expected to generate 0.6 times more return on investment than Performant Financial. However, ABM Industries Incorporated is 1.66 times less risky than Performant Financial. It trades about 0.02 of its potential returns per unit of risk. Performant Financial is currently generating about -0.05 per unit of risk. If you would invest  5,586  in ABM Industries Incorporated on September 5, 2024 and sell it today you would earn a total of  39.00  from holding ABM Industries Incorporated or generate 0.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

ABM Industries Incorporated  vs.  Performant Financial

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 recent stock price disarray, may contribute to short-term losses for the investors.

Performant Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Performant Financial 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 Performant Financial

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

The idea behind ABM Industries Incorporated and Performant Financial 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.