Correlation Between Alta Equipment and PACCAR
Can any of the company-specific risk be diversified away by investing in both Alta Equipment and PACCAR 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 PACCAR 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 PACCAR Inc, you can compare the effects of market volatilities on Alta Equipment and PACCAR 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 PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and PACCAR.
Diversification Opportunities for Alta Equipment and PACCAR
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alta and PACCAR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Alta Equipment i.e., Alta Equipment and PACCAR go up and down completely randomly.
Pair Corralation between Alta Equipment and PACCAR
Given the investment horizon of 90 days Alta Equipment Group is expected to generate 2.87 times more return on investment than PACCAR. However, Alta Equipment is 2.87 times more volatile than PACCAR Inc. It trades about 0.11 of its potential returns per unit of risk. PACCAR Inc is currently generating about 0.32 per unit of risk. If you would invest 652.00 in Alta Equipment Group on October 31, 2024 and sell it today you would earn a total of 41.00 from holding Alta Equipment Group or generate 6.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alta Equipment Group vs. PACCAR Inc
Performance |
| Timeline |
| Alta Equipment Group |
| PACCAR Inc |
Alta Equipment and PACCAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alta Equipment and PACCAR
The main advantage of trading using opposite Alta Equipment and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alta Equipment position performs unexpectedly, PACCAR 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 PACCAR will offset losses from the drop in PACCAR's long position.| Alta Equipment vs. PROG Holdings | Alta Equipment vs. GATX Corporation | Alta Equipment vs. McGrath RentCorp | Alta Equipment vs. Custom Truck One |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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