Correlation Between Balfour Beatty and Univest Pennsylvania

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

By analyzing existing cross correlation between Balfour Beatty plc and Univest Pennsylvania, you can compare the effects of market volatilities on Balfour Beatty and Univest Pennsylvania 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 Balfour Beatty with a short position of Univest Pennsylvania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balfour Beatty and Univest Pennsylvania.

Diversification Opportunities for Balfour Beatty and Univest Pennsylvania

-0.4

Correlation Coefficient

Balfour Beatty  Univest Pennsylvania

Very good diversification

The 3 months correlation between Balfour and Univest is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Balfour Beatty plc and Univest Pennsylvania in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univest Pennsylvania and Balfour Beatty 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 Balfour Beatty plc are associated (or correlated) with Univest Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univest Pennsylvania has no effect on the direction of Balfour Beatty i.e., Balfour Beatty and Univest Pennsylvania go up and down completely randomly.

Pair Corralation between Balfour Beatty and Univest Pennsylvania

Assuming the 90 days horizon Balfour Beatty plc is expected to under-perform the Univest Pennsylvania. In addition to that, Balfour Beatty is 1.14 times more volatile than Univest Pennsylvania. It trades about 0.0 of its total potential returns per unit of risk. Univest Pennsylvania is currently generating about 0.1 per unit of volatility. If you would invest  2,816  in Univest Pennsylvania on September 18, 2024 and sell it today you would earn a total of  387.00  from holding Univest Pennsylvania or generate 13.74% return on investment over 90 days.

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

Balfour Beatty plc  vs.  Univest Pennsylvania

Balfour Beatty plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Balfour Beatty plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Balfour Beatty is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Univest Pennsylvania

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Univest Pennsylvania are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Univest Pennsylvania reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Balfour Beatty and Univest Pennsylvania

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

The idea behind Balfour Beatty plc and Univest Pennsylvania 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.