Correlation Between AECOM TECHNOLOGY and Compugroup Medical

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

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

Diversification Opportunities for AECOM TECHNOLOGY and Compugroup Medical

0.54

Correlation Coefficient

AECOM TECHNOLOGY  Compugroup Medical

Very weak diversification

The 3 months correlation between AECOM and Compugroup is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AECOM TECHNOLOGY and Compugroup Medical SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compugroup Medical 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 Compugroup Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compugroup Medical has no effect on the direction of AECOM TECHNOLOGY i.e., AECOM TECHNOLOGY and Compugroup Medical go up and down completely randomly.

Pair Corralation between AECOM TECHNOLOGY and Compugroup Medical

Assuming the 90 days trading horizon AECOM TECHNOLOGY is expected to generate 0.66 times more return on investment than Compugroup Medical. However, AECOM TECHNOLOGY is 1.52 times less risky than Compugroup Medical. It trades about 0.19 of its potential returns per unit of risk. Compugroup Medical SE is currently generating about 0.04 per unit of risk. If you would invest  9,028  in AECOM TECHNOLOGY on August 31, 2024 and sell it today you would earn a total of  1,972  from holding AECOM TECHNOLOGY or generate 21.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AECOM TECHNOLOGY  vs.  Compugroup Medical SE

AECOM TECHNOLOGY

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM TECHNOLOGY are ranked lower than 15 (%) 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.

Compugroup Medical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compugroup Medical SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compugroup Medical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with AECOM TECHNOLOGY and Compugroup Medical

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

The idea behind AECOM TECHNOLOGY and Compugroup Medical SE 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.