Correlation Between ABM Industries and Thomson Reuters

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

Diversification Opportunities for ABM Industries and Thomson Reuters

0.12

Correlation Coefficient

ABM Industries  Thomson Reuters

Average diversification

The 3 months correlation between ABM and Thomson is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries Incorporated and Thomson Reuters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomson Reuters 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 Thomson Reuters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomson Reuters has no effect on the direction of ABM Industries i.e., ABM Industries and Thomson Reuters go up and down completely randomly.

Pair Corralation between ABM Industries and Thomson Reuters

Considering the 90-day investment horizon ABM Industries Incorporated is expected to under-perform the Thomson Reuters. In addition to that, ABM Industries is 1.55 times more volatile than Thomson Reuters. It trades about -0.05 of its total potential returns per unit of risk. Thomson Reuters is currently generating about 0.09 per unit of volatility. If you would invest  16,144  in Thomson Reuters on December 27, 2024 and sell it today you would earn a total of  1,058  from holding Thomson Reuters or generate 6.55% 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.  Thomson Reuters

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.

Thomson Reuters

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thomson Reuters are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Thomson Reuters may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ABM Industries and Thomson Reuters

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

The idea behind ABM Industries Incorporated and Thomson Reuters 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.