Correlation Between Network 1 and ABM Industries

Can any of the company-specific risk be diversified away by investing in both Network 1 and ABM Industries 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 Network 1 and ABM Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Network 1 Technologies and ABM Industries Incorporated, you can compare the effects of market volatilities on Network 1 and ABM Industries 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 Network 1 with a short position of ABM Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Network 1 and ABM Industries.

Diversification Opportunities for Network 1 and ABM Industries

-0.1

Correlation Coefficient

Network 1  ABM Industries

Good diversification

The 3 months correlation between Network and ABM is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Network 1 Technologies and ABM Industries Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABM Industries and Network 1 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 Network 1 Technologies are associated (or correlated) with ABM Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABM Industries has no effect on the direction of Network 1 i.e., Network 1 and ABM Industries go up and down completely randomly.

Pair Corralation between Network 1 and ABM Industries

Given the investment horizon of 90 days Network 1 Technologies is expected to generate 0.99 times more return on investment than ABM Industries. However, Network 1 Technologies is 1.01 times less risky than ABM Industries. It trades about 0.05 of its potential returns per unit of risk. ABM Industries Incorporated is currently generating about -0.04 per unit of risk. If you would invest  126.00  in Network 1 Technologies on December 28, 2024 and sell it today you would earn a total of  6.00  from holding Network 1 Technologies or generate 4.76% return on investment over 90 days.

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

Network 1 Technologies  vs.  ABM Industries Incorporated

Network 1 Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Network 1 Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Network 1 is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

ABM Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days ABM Industries Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, ABM Industries is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Network 1 and ABM Industries

The main advantage of trading using opposite Network 1 and ABM Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Network 1 position performs unexpectedly, ABM Industries 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 ABM Industries will offset losses from the drop in ABM Industries' long position.

The idea behind Network 1 Technologies and ABM Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.