Correlation Between Transportadora and AECOM TECHNOLOGY

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

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

Diversification Opportunities for Transportadora and AECOM TECHNOLOGY

0.81

Correlation Coefficient

Transportadora  AECOM TECHNOLOGY

Very poor diversification

The 3 months correlation between Transportadora and AECOM is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and AECOM TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM TECHNOLOGY and Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and AECOM TECHNOLOGY go up and down completely randomly.

Pair Corralation between Transportadora and AECOM TECHNOLOGY

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 2.22 times more return on investment than AECOM TECHNOLOGY. However, Transportadora is 2.22 times more volatile than AECOM TECHNOLOGY. It trades about 0.21 of its potential returns per unit of risk. AECOM TECHNOLOGY is currently generating about 0.19 per unit of risk. If you would invest  1,710  in Transportadora de Gas on August 31, 2024 and sell it today you would earn a total of  1,010  from holding Transportadora de Gas or generate 59.06% return on investment over 90 days.

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

Transportadora de Gas  vs.  AECOM TECHNOLOGY

Transportadora de Gas

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

AECOM TECHNOLOGY

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM TECHNOLOGY are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, AECOM TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transportadora and AECOM TECHNOLOGY

The main advantage of trading using opposite Transportadora and AECOM TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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 Transportadora de Gas 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..