Correlation Between AECOM TECHNOLOGY and VULCAN MATERIALS

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

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

Diversification Opportunities for AECOM TECHNOLOGY and VULCAN MATERIALS

0.66

Correlation Coefficient

AECOM TECHNOLOGY  VULCAN MATERIALS

Poor diversification

The 3 months correlation between AECOM and VULCAN is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AECOM TECHNOLOGY and VULCAN MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VULCAN MATERIALS 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 VULCAN MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VULCAN MATERIALS has no effect on the direction of AECOM TECHNOLOGY i.e., AECOM TECHNOLOGY and VULCAN MATERIALS go up and down completely randomly.

Pair Corralation between AECOM TECHNOLOGY and VULCAN MATERIALS

Assuming the 90 days trading horizon AECOM TECHNOLOGY is expected to under-perform the VULCAN MATERIALS. But the stock apears to be less risky and, when comparing its historical volatility, AECOM TECHNOLOGY is 1.15 times less risky than VULCAN MATERIALS. The stock trades about -0.17 of its potential returns per unit of risk. The VULCAN MATERIALS is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  25,144  in VULCAN MATERIALS on December 22, 2024 and sell it today you would lose (3,344) from holding VULCAN MATERIALS or give up 13.3% of portfolio value over 90 days.

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

AECOM TECHNOLOGY  vs.  VULCAN MATERIALS

AECOM TECHNOLOGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days AECOM TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

VULCAN MATERIALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days VULCAN MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AECOM TECHNOLOGY and VULCAN MATERIALS

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

The idea behind AECOM TECHNOLOGY and VULCAN MATERIALS 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.