Correlation Between National Retail and AECOM TECHNOLOGY

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

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

Diversification Opportunities for National Retail and AECOM TECHNOLOGY

0.27

Correlation Coefficient

National Retail  AECOM TECHNOLOGY

Modest diversification

The 3 months correlation between National and AECOM is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and AECOM TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM TECHNOLOGY and National Retail 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 National Retail Properties are associated (or correlated) with AECOM TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM TECHNOLOGY has no effect on the direction of National Retail i.e., National Retail and AECOM TECHNOLOGY go up and down completely randomly.

Pair Corralation between National Retail and AECOM TECHNOLOGY

Assuming the 90 days trading horizon National Retail Properties is expected to generate 1.12 times more return on investment than AECOM TECHNOLOGY. However, National Retail is 1.12 times more volatile than AECOM TECHNOLOGY. It trades about -0.04 of its potential returns per unit of risk. AECOM TECHNOLOGY is currently generating about -0.21 per unit of risk. If you would invest  4,134  in National Retail Properties on November 29, 2024 and sell it today you would lose (151.00) from holding National Retail Properties or give up 3.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

National Retail Properties  vs.  AECOM TECHNOLOGY

National Retail Prop

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Retail is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AECOM TECHNOLOGY

Risk-Adjusted Performance

Very Weak

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

Pair Trading with National Retail and AECOM TECHNOLOGY

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

The idea behind National Retail Properties and AECOM TECHNOLOGY 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.