Correlation Between Alta Equipment and African Discovery
Can any of the company-specific risk be diversified away by investing in both Alta Equipment and African Discovery 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 Alta Equipment and African Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alta Equipment Group and African Discovery Group, you can compare the effects of market volatilities on Alta Equipment and African Discovery 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 Alta Equipment with a short position of African Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and African Discovery.
Diversification Opportunities for Alta Equipment and African Discovery
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Alta and African is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and African Discovery Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Discovery and Alta Equipment 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 Alta Equipment Group are associated (or correlated) with African Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Discovery has no effect on the direction of Alta Equipment i.e., Alta Equipment and African Discovery go up and down completely randomly.
Pair Corralation between Alta Equipment and African Discovery
Assuming the 90 days trading horizon Alta Equipment is expected to generate 15.23 times less return on investment than African Discovery. But when comparing it to its historical volatility, Alta Equipment Group is 9.92 times less risky than African Discovery. It trades about 0.03 of its potential returns per unit of risk. African Discovery Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3.50 in African Discovery Group on August 24, 2024 and sell it today you would lose (2.90) from holding African Discovery Group or give up 82.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 98.99% |
| Values | Daily Returns |
Alta Equipment Group vs. African Discovery Group
Performance |
| Timeline |
| Alta Equipment Group |
| African Discovery |
Alta Equipment and African Discovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alta Equipment and African Discovery
The main advantage of trading using opposite Alta Equipment and African Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alta Equipment position performs unexpectedly, African Discovery 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 African Discovery will offset losses from the drop in African Discovery's long position.| Alta Equipment vs. Triton International Limited | Alta Equipment vs. Babcock Wilcox Enterprises | Alta Equipment vs. Triton International Limited | Alta Equipment vs. Triton International Limited |
| African Discovery vs. United Rentals | African Discovery vs. Ashtead Gro | African Discovery vs. Ashtead Group plc | African Discovery vs. AerCap Holdings NV |
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 the Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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