Correlation Between AECOM TECHNOLOGY and Singapore ReinsuranceLimit

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

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

Diversification Opportunities for AECOM TECHNOLOGY and Singapore ReinsuranceLimit

0.53

Correlation Coefficient

AECOM TECHNOLOGY  Singapore ReinsuranceLimit

Very weak diversification

The 3 months correlation between AECOM and Singapore is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding AECOM TECHNOLOGY and Singapore Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore ReinsuranceLimit 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 Singapore ReinsuranceLimit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore ReinsuranceLimit has no effect on the direction of AECOM TECHNOLOGY i.e., AECOM TECHNOLOGY and Singapore ReinsuranceLimit go up and down completely randomly.

Pair Corralation between AECOM TECHNOLOGY and Singapore ReinsuranceLimit

Assuming the 90 days trading horizon AECOM TECHNOLOGY is expected to generate 2.21 times less return on investment than Singapore ReinsuranceLimit. But when comparing it to its historical volatility, AECOM TECHNOLOGY is 1.19 times less risky than Singapore ReinsuranceLimit. It trades about 0.07 of its potential returns per unit of risk. Singapore Reinsurance is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,200  in Singapore Reinsurance on October 6, 2024 and sell it today you would earn a total of  340.00  from holding Singapore Reinsurance or generate 10.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

AECOM TECHNOLOGY  vs.  Singapore Reinsurance

AECOM TECHNOLOGY

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM TECHNOLOGY are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, AECOM TECHNOLOGY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Singapore ReinsuranceLimit

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Reinsurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Singapore ReinsuranceLimit unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AECOM TECHNOLOGY and Singapore ReinsuranceLimit

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

The idea behind AECOM TECHNOLOGY and Singapore Reinsurance 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.