Correlation Between Global Payments and AZZ Incorporated

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

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

Diversification Opportunities for Global Payments and AZZ Incorporated

-0.14

Correlation Coefficient

Global Payments  AZZ Incorporated

Good diversification

The 3 months correlation between Global and AZZ is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments and AZZ Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AZZ Incorporated 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 AZZ Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AZZ Incorporated has no effect on the direction of Global Payments i.e., Global Payments and AZZ Incorporated go up and down completely randomly.

Pair Corralation between Global Payments and AZZ Incorporated

Considering the 90-day investment horizon Global Payments is expected to under-perform the AZZ Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Global Payments is 1.32 times less risky than AZZ Incorporated. The stock trades about -0.19 of its potential returns per unit of risk. The AZZ Incorporated is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  9,472  in AZZ Incorporated on December 11, 2024 and sell it today you would lose (699.00) from holding AZZ Incorporated or give up 7.38% of portfolio value over 90 days.

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

Global Payments  vs.  AZZ Incorporated

Global Payments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Payments 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 very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

AZZ Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days AZZ Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Global Payments and AZZ Incorporated

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

The idea behind Global Payments and AZZ Incorporated 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.