Correlation Between Aecon and Cardno

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

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

Diversification Opportunities for Aecon and Cardno

-0.9

Correlation Coefficient

Aecon  Cardno

Pay attention - limited upside

The 3 months correlation between Aecon and Cardno is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Aecon Group and Cardno Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardno Limited and Aecon 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 Aecon Group are associated (or correlated) with Cardno. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardno Limited has no effect on the direction of Aecon i.e., Aecon and Cardno go up and down completely randomly.

Pair Corralation between Aecon and Cardno

Assuming the 90 days horizon Aecon Group is expected to generate 0.59 times more return on investment than Cardno. However, Aecon Group is 1.69 times less risky than Cardno. It trades about 0.27 of its potential returns per unit of risk. Cardno Limited is currently generating about -0.29 per unit of risk. If you would invest  1,355  in Aecon Group on September 3, 2024 and sell it today you would earn a total of  701.00  from holding Aecon Group or generate 51.73% return on investment over 90 days.

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

Aecon Group  vs.  Cardno Limited

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. Despite nearly uncertain basic indicators, Aecon reported solid returns over the last few months and may actually be approaching a breakup point.

Cardno Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cardno Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aecon and Cardno

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

The idea behind Aecon Group and Cardno Limited 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.