Correlation Between MasTec and Aecom Technology

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

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

Diversification Opportunities for MasTec and Aecom Technology

0.7

Correlation Coefficient

MasTec  Aecom Technology

Poor diversification

The 3 months correlation between MasTec and Aecom is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding MasTec Inc and Aecom Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecom Technology and MasTec 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 MasTec Inc 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 MasTec i.e., MasTec and Aecom Technology go up and down completely randomly.

Pair Corralation between MasTec and Aecom Technology

Considering the 90-day investment horizon MasTec Inc is expected to generate 2.58 times more return on investment than Aecom Technology. However, MasTec is 2.58 times more volatile than Aecom Technology. It trades about -0.03 of its potential returns per unit of risk. Aecom Technology is currently generating about -0.13 per unit of risk. If you would invest  13,580  in MasTec Inc on December 28, 2024 and sell it today you would lose (1,308) from holding MasTec Inc or give up 9.63% of portfolio value over 90 days.

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

MasTec Inc  vs.  Aecom Technology

MasTec Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days MasTec Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, MasTec is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 MasTec and Aecom Technology

The main advantage of trading using opposite MasTec and Aecom Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MasTec 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 MasTec Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.