Correlation Between Global Payments and Aramark Holdings

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

By analyzing existing cross correlation between Global Payments and Aramark Holdings, you can compare the effects of market volatilities on Global Payments and Aramark Holdings 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 Global Payments with a short position of Aramark Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Payments and Aramark Holdings.

Diversification Opportunities for Global Payments and Aramark Holdings

0.59

Correlation Coefficient

Global Payments  Aramark Holdings

Very weak diversification

The 3 months correlation between Global and Aramark is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments and Aramark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aramark Holdings and Global Payments 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 Global Payments are associated (or correlated) with Aramark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aramark Holdings has no effect on the direction of Global Payments i.e., Global Payments and Aramark Holdings go up and down completely randomly.

Pair Corralation between Global Payments and Aramark Holdings

Considering the 90-day investment horizon Global Payments is expected to generate 0.67 times more return on investment than Aramark Holdings. However, Global Payments is 1.48 times less risky than Aramark Holdings. It trades about -0.16 of its potential returns per unit of risk. Aramark Holdings is currently generating about -0.21 per unit of risk. If you would invest  11,683  in Global Payments on September 23, 2024 and sell it today you would lose (480.00) from holding Global Payments or give up 4.11% of portfolio value over 90 days.

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

Global Payments  vs.  Aramark Holdings

Global Payments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Payments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global Payments is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Aramark Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aramark Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, Aramark Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Global Payments and Aramark Holdings

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

The idea behind Global Payments and Aramark Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.