Correlation Between AECOM TECHNOLOGY and Barratt Developments

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

By analyzing existing cross correlation between AECOM TECHNOLOGY and Barratt Developments plc, you can compare the effects of market volatilities on AECOM TECHNOLOGY and Barratt Developments 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 Barratt Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of AECOM TECHNOLOGY and Barratt Developments.

Diversification Opportunities for AECOM TECHNOLOGY and Barratt Developments

-0.56

Correlation Coefficient

AECOM TECHNOLOGY  Barratt Developments

Excellent diversification

The 3 months correlation between AECOM and Barratt is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding AECOM TECHNOLOGY and Barratt Developments plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barratt Developments plc 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 Barratt Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barratt Developments plc has no effect on the direction of AECOM TECHNOLOGY i.e., AECOM TECHNOLOGY and Barratt Developments go up and down completely randomly.

Pair Corralation between AECOM TECHNOLOGY and Barratt Developments

Assuming the 90 days trading horizon AECOM TECHNOLOGY is expected to generate 0.63 times more return on investment than Barratt Developments. However, AECOM TECHNOLOGY is 1.58 times less risky than Barratt Developments. It trades about 0.05 of its potential returns per unit of risk. Barratt Developments plc is currently generating about 0.02 per unit of risk. If you would invest  7,745  in AECOM TECHNOLOGY on October 22, 2024 and sell it today you would earn a total of  2,755  from holding AECOM TECHNOLOGY or generate 35.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

AECOM TECHNOLOGY  vs.  Barratt Developments plc

AECOM TECHNOLOGY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM TECHNOLOGY are ranked lower than 5 (%) 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.

Barratt Developments plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barratt Developments plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AECOM TECHNOLOGY and Barratt Developments

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

The idea behind AECOM TECHNOLOGY and Barratt Developments plc 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.