Correlation Between Quanta Services and Balfour Beatty

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

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

Diversification Opportunities for Quanta Services and Balfour Beatty

-0.42

Correlation Coefficient

Quanta Services  Balfour Beatty

Very good diversification

The 3 months correlation between Quanta and Balfour is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Quanta Services and Balfour Beatty plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balfour Beatty plc and Quanta Services 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 Quanta Services are associated (or correlated) with Balfour Beatty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balfour Beatty plc has no effect on the direction of Quanta Services i.e., Quanta Services and Balfour Beatty go up and down completely randomly.

Pair Corralation between Quanta Services and Balfour Beatty

Considering the 90-day investment horizon Quanta Services is expected to generate 0.59 times more return on investment than Balfour Beatty. However, Quanta Services is 1.7 times less risky than Balfour Beatty. It trades about 0.22 of its potential returns per unit of risk. Balfour Beatty plc is currently generating about 0.0 per unit of risk. If you would invest  27,384  in Quanta Services on September 17, 2024 and sell it today you would earn a total of  6,858  from holding Quanta Services or generate 25.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Quanta Services  vs.  Balfour Beatty plc

Quanta Services

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quanta Services are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Quanta Services reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Quanta Services and Balfour Beatty

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

The idea behind Quanta Services and Balfour Beatty plc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.