Correlation Between AECOM TECHNOLOGY and Volkswagen

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

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

Diversification Opportunities for AECOM TECHNOLOGY and Volkswagen

-0.66

Correlation Coefficient

AECOM TECHNOLOGY  Volkswagen

Excellent diversification

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

Pair Corralation between AECOM TECHNOLOGY and Volkswagen

Assuming the 90 days trading horizon AECOM TECHNOLOGY is expected to generate 5.48 times less return on investment than Volkswagen. But when comparing it to its historical volatility, AECOM TECHNOLOGY is 1.03 times less risky than Volkswagen. It trades about 0.07 of its potential returns per unit of risk. Volkswagen AG VZO is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  8,704  in Volkswagen AG VZO on October 22, 2024 and sell it today you would earn a total of  638.00  from holding Volkswagen AG VZO or generate 7.33% return on investment over 90 days.

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

AECOM TECHNOLOGY  vs.  Volkswagen AG VZO

AECOM TECHNOLOGY

Risk-Adjusted Performance

5 of 100

Insignificant

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.

Volkswagen AG VZO

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG VZO are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Volkswagen is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AECOM TECHNOLOGY and Volkswagen

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

The idea behind AECOM TECHNOLOGY and Volkswagen AG VZO 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 Commodity Directory module to find actively traded commodities issued by global exchanges.