Correlation Between ABM Industries and Target Hospitality

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

Diversification Opportunities for ABM Industries and Target Hospitality

0.03

Correlation Coefficient

ABM Industries  Target Hospitality

Significant diversification

The 3 months correlation between ABM and Target is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries Incorporated and Target Hospitality Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Hospitality Corp 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 Target Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Hospitality Corp has no effect on the direction of ABM Industries i.e., ABM Industries and Target Hospitality go up and down completely randomly.

Pair Corralation between ABM Industries and Target Hospitality

Considering the 90-day investment horizon ABM Industries Incorporated is expected to generate 0.54 times more return on investment than Target Hospitality. However, ABM Industries Incorporated is 1.85 times less risky than Target Hospitality. It trades about 0.05 of its potential returns per unit of risk. Target Hospitality Corp is currently generating about -0.02 per unit of risk. If you would invest  4,134  in ABM Industries Incorporated on August 31, 2024 and sell it today you would earn a total of  1,565  from holding ABM Industries Incorporated or generate 37.86% return on investment over 90 days.

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

ABM Industries Incorporated  vs.  Target Hospitality Corp

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.

Target Hospitality Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target Hospitality Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with ABM Industries and Target Hospitality

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

The idea behind ABM Industries Incorporated and Target Hospitality Corp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.