Correlation Between Matrix Service and Aecom Technology

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

By analyzing existing cross correlation between Matrix Service Co and Aecom Technology, you can compare the effects of market volatilities on Matrix Service and Aecom Technology 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 Matrix Service with a short position of Aecom Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matrix Service and Aecom Technology.

Diversification Opportunities for Matrix Service and Aecom Technology

0.32

Correlation Coefficient

Matrix Service  Aecom Technology

Weak diversification

The 3 months correlation between Matrix and Aecom is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Matrix Service Co and Aecom Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecom Technology and Matrix Service 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 Matrix Service Co are associated (or correlated) with Aecom Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aecom Technology has no effect on the direction of Matrix Service i.e., Matrix Service and Aecom Technology go up and down completely randomly.

Pair Corralation between Matrix Service and Aecom Technology

Given the investment horizon of 90 days Matrix Service Co is expected to generate 2.19 times more return on investment than Aecom Technology. However, Matrix Service is 2.19 times more volatile than Aecom Technology. It trades about 0.04 of its potential returns per unit of risk. Aecom Technology is currently generating about -0.13 per unit of risk. If you would invest  1,203  in Matrix Service Co on December 28, 2024 and sell it today you would earn a total of  58.00  from holding Matrix Service Co or generate 4.82% return on investment over 90 days.

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

Matrix Service Co  vs.  Aecom Technology

Matrix Service

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix Service Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Matrix Service may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 latest fragile performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Matrix Service and Aecom Technology

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

The idea behind Matrix Service Co and Aecom Technology 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.