Correlation Between ABM Industries and AAR Corp

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Can any of the company-specific risk be diversified away by investing in both ABM Industries and AAR Corp 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 ABM Industries and AAR Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABM Industries and AAR Corp, you can compare the effects of market volatilities on ABM Industries and AAR Corp 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 ABM Industries with a short position of AAR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABM Industries and AAR Corp.

Diversification Opportunities for ABM Industries and AAR Corp

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between ABM Industries and AAR Corp is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and ABM Industries 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 ABM Industries are associated (or correlated) with AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of ABM Industries i.e., ABM Industries and AAR Corp go up and down completely randomly.

Pair Corralation between ABM Industries and AAR Corp

Considering the 90-day investment horizon ABM Industries is expected to generate 1.03 times more return on investment than AAR Corp. However, ABM Industries is 1.03 times more volatile than AAR Corp. It trades about -0.04 of its potential returns per unit of risk. AAR Corp is currently generating about -0.05 per unit of risk. If you would invest  4,586  in ABM Industries on July 1, 2022 and sell it today you would lose (729.00)  from holding ABM Industries or give up 15.9% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

ABM Industries  vs.  AAR Corp

 Performance (%) 
       Timeline  
ABM Industries 
ABM Industries Performance
0 of 100
Over the last 90 days ABM Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's fundamental drivers remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

ABM Industries Price Channel

AAR Corp 
AAR Corp Performance
0 of 100
Over the last 90 days AAR Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in October 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

AAR Corp Price Channel

ABM Industries and AAR Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ABM Industries and AAR Corp

The main advantage of trading using opposite ABM Industries and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABM Industries position performs unexpectedly, AAR Corp 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 AAR Corp will offset losses from the drop in AAR Corp's long position.
ABM Industries vs. Amazon Inc
The idea behind ABM Industries and AAR Corp 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.
AAR Corp vs. Amazon Inc
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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