Correlation Between Royal Helium and Aecon

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

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

Diversification Opportunities for Royal Helium and Aecon

-0.56

Correlation Coefficient

Royal Helium  Aecon

Excellent diversification

The 3 months correlation between Royal and Aecon is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Royal Helium and Aecon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecon Group and Royal Helium 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 Royal Helium are associated (or correlated) with Aecon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aecon Group has no effect on the direction of Royal Helium i.e., Royal Helium and Aecon go up and down completely randomly.

Pair Corralation between Royal Helium and Aecon

Assuming the 90 days horizon Royal Helium is expected to generate 4.89 times less return on investment than Aecon. In addition to that, Royal Helium is 3.07 times more volatile than Aecon Group. It trades about 0.02 of its total potential returns per unit of risk. Aecon Group is currently generating about 0.27 per unit of volatility. If you would invest  1,809  in Aecon Group on September 4, 2024 and sell it today you would earn a total of  1,056  from holding Aecon Group or generate 58.37% return on investment over 90 days.

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

Royal Helium  vs.  Aecon Group

Royal Helium

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Helium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Royal Helium may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aecon Group

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aecon Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Aecon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Helium and Aecon

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

The idea behind Royal Helium and Aecon Group 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.

Check out your portfolio center.

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.