Correlation Between Balfour Beatty and Associated British

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

By analyzing existing cross correlation between Balfour Beatty plc and Associated British Foods, you can compare the effects of market volatilities on Balfour Beatty and Associated British 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 Balfour Beatty with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balfour Beatty and Associated British.

Diversification Opportunities for Balfour Beatty and Associated British

0.0

Correlation Coefficient

Balfour Beatty  Associated British

Pay attention - limited upside

The 3 months correlation between Balfour and Associated is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Balfour Beatty plc and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and Balfour Beatty 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 Balfour Beatty plc are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Balfour Beatty i.e., Balfour Beatty and Associated British go up and down completely randomly.

Pair Corralation between Balfour Beatty and Associated British

Assuming the 90 days trading horizon Balfour Beatty plc is expected to generate 1.15 times more return on investment than Associated British. However, Balfour Beatty is 1.15 times more volatile than Associated British Foods. It trades about -0.07 of its potential returns per unit of risk. Associated British Foods is currently generating about -0.1 per unit of risk. If you would invest  44,840  in Balfour Beatty plc on October 23, 2024 and sell it today you would lose (800.00) from holding Balfour Beatty plc or give up 1.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Balfour Beatty plc  vs.  Associated British Foods

Balfour Beatty plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Balfour Beatty plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Balfour Beatty is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Balfour Beatty and Associated British

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

The idea behind Balfour Beatty plc and Associated British Foods 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.