Correlation Between Aecon and Bird Construction

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

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

Diversification Opportunities for Aecon and Bird Construction

0.75

Correlation Coefficient

Aecon  Bird Construction

Poor diversification

The 3 months correlation between Aecon and Bird is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Aecon Group and Bird Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bird Construction 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 Bird Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bird Construction has no effect on the direction of Aecon i.e., Aecon and Bird Construction go up and down completely randomly.

Pair Corralation between Aecon and Bird Construction

Assuming the 90 days trading horizon Aecon Group is expected to generate 1.01 times more return on investment than Bird Construction. However, Aecon is 1.01 times more volatile than Bird Construction. It trades about 0.28 of its potential returns per unit of risk. Bird Construction is currently generating about 0.2 per unit of risk. If you would invest  1,813  in Aecon Group on September 2, 2024 and sell it today you would earn a total of  1,065  from holding Aecon Group or generate 58.74% return on investment over 90 days.

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

Aecon Group  vs.  Bird Construction

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 abnormal technical and fundamental indicators, Aecon displayed solid returns over the last few months and may actually be approaching a breakup point.

Bird Construction

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bird Construction are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Bird Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aecon and Bird Construction

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

The idea behind Aecon Group and Bird Construction 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.