Correlation Between TeraGo and Aecon

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

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

Diversification Opportunities for TeraGo and Aecon

-0.9

Correlation Coefficient

TeraGo  Aecon

Pay attention - limited upside

The 3 months correlation between TeraGo and Aecon is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding TeraGo Inc and Aecon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecon Group and TeraGo 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 TeraGo Inc 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 TeraGo i.e., TeraGo and Aecon go up and down completely randomly.

Pair Corralation between TeraGo and Aecon

Assuming the 90 days trading horizon TeraGo Inc is expected to under-perform the Aecon. In addition to that, TeraGo is 1.14 times more volatile than Aecon Group. It trades about -0.28 of its total potential returns per unit of risk. Aecon Group is currently generating about 0.28 per unit of volatility. If you would invest  1,813  in Aecon Group on September 3, 2024 and sell it today you would earn a total of  1,065  from holding Aecon Group or generate 58.74% return on investment over 90 days.

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

TeraGo Inc  vs.  Aecon Group

TeraGo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TeraGo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 TeraGo and Aecon

The main advantage of trading using opposite TeraGo and Aecon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TeraGo 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 TeraGo Inc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.