Correlation Between Aecon and Reliant Holdings

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

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

Diversification Opportunities for Aecon and Reliant Holdings

0.02

Correlation Coefficient

Aecon  Reliant Holdings

Significant diversification

The 3 months correlation between Aecon and Reliant is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Aecon Group and Reliant Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliant Holdings and Aecon 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 Aecon Group are associated (or correlated) with Reliant Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliant Holdings has no effect on the direction of Aecon i.e., Aecon and Reliant Holdings go up and down completely randomly.

Pair Corralation between Aecon and Reliant Holdings

Assuming the 90 days horizon Aecon Group is expected to generate 0.11 times more return on investment than Reliant Holdings. However, Aecon Group is 9.07 times less risky than Reliant Holdings. It trades about -0.15 of its potential returns per unit of risk. Reliant Holdings is currently generating about -0.05 per unit of risk. If you would invest  1,996  in Aecon Group on September 14, 2024 and sell it today you would lose (120.00) from holding Aecon Group or give up 6.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Aecon Group  vs.  Reliant Holdings

Aecon Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aecon Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aecon reported solid returns over the last few months and may actually be approaching a breakup point.

Reliant Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reliant Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Reliant Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aecon and Reliant Holdings

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

The idea behind Aecon Group and Reliant Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.