Correlation Between AECOM TECHNOLOGY and National Beverage

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

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

Diversification Opportunities for AECOM TECHNOLOGY and National Beverage

0.63

Correlation Coefficient

AECOM TECHNOLOGY  National Beverage

Poor diversification

The 3 months correlation between AECOM and National is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding AECOM TECHNOLOGY and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of AECOM TECHNOLOGY i.e., AECOM TECHNOLOGY and National Beverage go up and down completely randomly.

Pair Corralation between AECOM TECHNOLOGY and National Beverage

Assuming the 90 days trading horizon AECOM TECHNOLOGY is expected to generate 0.74 times more return on investment than National Beverage. However, AECOM TECHNOLOGY is 1.35 times less risky than National Beverage. It trades about 0.08 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.01 per unit of risk. If you would invest  7,075  in AECOM TECHNOLOGY on October 24, 2024 and sell it today you would earn a total of  3,525  from holding AECOM TECHNOLOGY or generate 49.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.76%
Values	Daily Returns

AECOM TECHNOLOGY  vs.  National Beverage Corp

AECOM TECHNOLOGY

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM TECHNOLOGY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, AECOM TECHNOLOGY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

National Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AECOM TECHNOLOGY and National Beverage

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

The idea behind AECOM TECHNOLOGY and National Beverage Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.