Correlation Between Quaker Chemical and AECOM

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

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

Diversification Opportunities for Quaker Chemical and AECOM

0.06

Correlation Coefficient

Quaker Chemical  AECOM

Significant diversification

The 3 months correlation between Quaker and AECOM is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and AECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM and Quaker Chemical 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 Quaker Chemical are associated (or correlated) with AECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM has no effect on the direction of Quaker Chemical i.e., Quaker Chemical and AECOM go up and down completely randomly.

Pair Corralation between Quaker Chemical and AECOM

Assuming the 90 days horizon Quaker Chemical is expected to under-perform the AECOM. In addition to that, Quaker Chemical is 1.35 times more volatile than AECOM. It trades about -0.03 of its total potential returns per unit of risk. AECOM is currently generating about 0.05 per unit of volatility. If you would invest  7,794  in AECOM on October 25, 2024 and sell it today you would earn a total of  2,906  from holding AECOM or generate 37.29% return on investment over 90 days.

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

Quaker Chemical  vs.  AECOM

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Quaker Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AECOM

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AECOM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quaker Chemical and AECOM

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

The idea behind Quaker Chemical and AECOM 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.