Correlation Between Big Yellow and AECOM

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

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

Diversification Opportunities for Big Yellow and AECOM

-0.85

Correlation Coefficient

Big Yellow  AECOM

Pay attention - limited upside

The 3 months correlation between Big and AECOM is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Big Yellow Group and AECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM and Big Yellow 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 Big Yellow Group are associated (or correlated) with AECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM has no effect on the direction of Big Yellow i.e., Big Yellow and AECOM go up and down completely randomly.

Pair Corralation between Big Yellow and AECOM

Assuming the 90 days horizon Big Yellow Group is expected to under-perform the AECOM. But the stock apears to be less risky and, when comparing its historical volatility, Big Yellow Group is 1.35 times less risky than AECOM. The stock trades about -0.14 of its potential returns per unit of risk. The AECOM is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  9,028  in AECOM on September 3, 2024 and sell it today you would earn a total of  1,972  from holding AECOM or generate 21.84% return on investment over 90 days.

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

Big Yellow Group  vs.  AECOM

Big Yellow Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Yellow Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AECOM

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AECOM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Yellow and AECOM

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

The idea behind Big Yellow Group and AECOM 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.