Correlation Between Autocanada and Aecon

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

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

Diversification Opportunities for Autocanada and Aecon

0.59

Correlation Coefficient

Autocanada  Aecon

Very weak diversification

The 3 months correlation between Autocanada and Aecon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Autocanada and Aecon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecon Group and Autocanada 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 Autocanada are associated (or correlated) with Aecon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aecon Group has no effect on the direction of Autocanada i.e., Autocanada and Aecon go up and down completely randomly.

Pair Corralation between Autocanada and Aecon

Assuming the 90 days trading horizon Autocanada is expected to generate 1.43 times less return on investment than Aecon. In addition to that, Autocanada is 1.29 times more volatile than Aecon Group. It trades about 0.15 of its total potential returns per unit of risk. Aecon Group is currently generating about 0.27 per unit of volatility. If you would invest  1,809  in Aecon Group on September 4, 2024 and sell it today you would earn a total of  1,056  from holding Aecon Group or generate 58.37% return on investment over 90 days.

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

Autocanada  vs.  Aecon Group

Autocanada

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Autocanada are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Autocanada displayed solid returns over the last few months and may actually be approaching a breakup point.

Aecon Group

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aecon Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Aecon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autocanada and Aecon

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

The idea behind Autocanada and Aecon Group 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..