Correlation Between Aramark Holdings and AZZ Incorporated

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

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

Diversification Opportunities for Aramark Holdings and AZZ Incorporated

0.35

Correlation Coefficient

Aramark Holdings  AZZ Incorporated

Weak diversification

The 3 months correlation between Aramark and AZZ is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Aramark Holdings and AZZ Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AZZ Incorporated and Aramark Holdings 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 Aramark Holdings are associated (or correlated) with AZZ Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AZZ Incorporated has no effect on the direction of Aramark Holdings i.e., Aramark Holdings and AZZ Incorporated go up and down completely randomly.

Pair Corralation between Aramark Holdings and AZZ Incorporated

Given the investment horizon of 90 days Aramark Holdings is expected to under-perform the AZZ Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Aramark Holdings is 1.39 times less risky than AZZ Incorporated. The stock trades about -0.1 of its potential returns per unit of risk. The AZZ Incorporated is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,296  in AZZ Incorporated on November 28, 2024 and sell it today you would earn a total of  320.00  from holding AZZ Incorporated or generate 3.44% return on investment over 90 days.

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

Aramark Holdings  vs.  AZZ Incorporated

Aramark Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aramark Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

AZZ Incorporated

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, AZZ Incorporated is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aramark Holdings and AZZ Incorporated

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

The idea behind Aramark Holdings and AZZ Incorporated 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.