Correlation Between AECOM TECHNOLOGY and STMICROELECTRONICS

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

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

Diversification Opportunities for AECOM TECHNOLOGY and STMICROELECTRONICS

-0.64

Correlation Coefficient

AECOM TECHNOLOGY  STMICROELECTRONICS

Excellent diversification

The 3 months correlation between AECOM and STMICROELECTRONICS is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding AECOM TECHNOLOGY and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY are associated (or correlated) with STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of AECOM TECHNOLOGY i.e., AECOM TECHNOLOGY and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between AECOM TECHNOLOGY and STMICROELECTRONICS

Assuming the 90 days trading horizon AECOM TECHNOLOGY is expected to under-perform the STMICROELECTRONICS. But the stock apears to be less risky and, when comparing its historical volatility, AECOM TECHNOLOGY is 2.83 times less risky than STMICROELECTRONICS. The stock trades about -0.51 of its potential returns per unit of risk. The STMICROELECTRONICS is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,357  in STMICROELECTRONICS on September 24, 2024 and sell it today you would lose (13.00) from holding STMICROELECTRONICS or give up 0.55% of portfolio value over 90 days.

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

AECOM TECHNOLOGY  vs.  STMICROELECTRONICS

AECOM TECHNOLOGY

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM TECHNOLOGY are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, AECOM TECHNOLOGY may actually be approaching a critical reversion point that can send shares even higher in January 2025.

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, STMICROELECTRONICS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AECOM TECHNOLOGY and STMICROELECTRONICS

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

The idea behind AECOM TECHNOLOGY and STMICROELECTRONICS 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.