Correlation Between AECOM TECHNOLOGY and Continental Aktiengesellscha

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

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

Diversification Opportunities for AECOM TECHNOLOGY and Continental Aktiengesellscha

0.76

Correlation Coefficient

AECOM TECHNOLOGY  Continental Aktiengesellscha

Poor diversification

The 3 months correlation between AECOM and Continental is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding AECOM TECHNOLOGY and Continental Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Aktiengesellscha 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 Continental Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Aktiengesellscha has no effect on the direction of AECOM TECHNOLOGY i.e., AECOM TECHNOLOGY and Continental Aktiengesellscha go up and down completely randomly.

Pair Corralation between AECOM TECHNOLOGY and Continental Aktiengesellscha

Assuming the 90 days trading horizon AECOM TECHNOLOGY is expected to generate 1.18 times more return on investment than Continental Aktiengesellscha. However, AECOM TECHNOLOGY is 1.18 times more volatile than Continental Aktiengesellschaft. It trades about 0.11 of its potential returns per unit of risk. Continental Aktiengesellschaft is currently generating about 0.13 per unit of risk. If you would invest  10,100  in AECOM TECHNOLOGY on September 19, 2024 and sell it today you would earn a total of  400.00  from holding AECOM TECHNOLOGY or generate 3.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

AECOM TECHNOLOGY  vs.  Continental Aktiengesellschaft

AECOM TECHNOLOGY

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM TECHNOLOGY are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, AECOM TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Continental Aktiengesellscha

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Aktiengesellschaft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Continental Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AECOM TECHNOLOGY and Continental Aktiengesellscha

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

The idea behind AECOM TECHNOLOGY and Continental Aktiengesellschaft 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.