Correlation Between Transurban and Arcosa

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

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

Diversification Opportunities for Transurban and Arcosa

-0.24

Correlation Coefficient

Transurban  Arcosa

Very good diversification

The 3 months correlation between Transurban and Arcosa is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Transurban Group and Arcosa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcosa Inc and Transurban 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 Transurban Group are associated (or correlated) with Arcosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcosa Inc has no effect on the direction of Transurban i.e., Transurban and Arcosa go up and down completely randomly.

Pair Corralation between Transurban and Arcosa

Assuming the 90 days horizon Transurban is expected to generate 7.21 times less return on investment than Arcosa. But when comparing it to its historical volatility, Transurban Group is 1.72 times less risky than Arcosa. It trades about 0.02 of its potential returns per unit of risk. Arcosa Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,975  in Arcosa Inc on October 12, 2024 and sell it today you would earn a total of  4,175  from holding Arcosa Inc or generate 83.92% return on investment over 90 days.

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

Transurban Group  vs.  Arcosa Inc

Transurban Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transurban Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Transurban is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Arcosa Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arcosa Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Arcosa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Transurban and Arcosa

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

The idea behind Transurban Group and Arcosa Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.