Correlation Between Alta Equipment and Torm PLC
Can any of the company-specific risk be diversified away by investing in both Alta Equipment and Torm PLC 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 Torm PLC 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 Torm PLC Class, you can compare the effects of market volatilities on Alta Equipment and Torm PLC 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 Torm PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and Torm PLC.
Diversification Opportunities for Alta Equipment and Torm PLC
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alta and Torm is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and Torm PLC Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torm PLC Class 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 Torm PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torm PLC Class has no effect on the direction of Alta Equipment i.e., Alta Equipment and Torm PLC go up and down completely randomly.
Pair Corralation between Alta Equipment and Torm PLC
Given the investment horizon of 90 days Alta Equipment Group is expected to generate 1.82 times more return on investment than Torm PLC. However, Alta Equipment is 1.82 times more volatile than Torm PLC Class. It trades about 0.2 of its potential returns per unit of risk. Torm PLC Class is currently generating about -0.26 per unit of risk. If you would invest 639.00 in Alta Equipment Group on August 30, 2024 and sell it today you would earn a total of 135.00 from holding Alta Equipment Group or generate 21.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alta Equipment Group vs. Torm PLC Class
Performance |
| Timeline |
| Alta Equipment Group |
| Torm PLC Class |
Alta Equipment and Torm PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alta Equipment and Torm PLC
The main advantage of trading using opposite Alta Equipment and Torm PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alta Equipment position performs unexpectedly, Torm PLC 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 Torm PLC will offset losses from the drop in Torm PLC's long position.| Alta Equipment vs. HE Equipment Services | Alta Equipment vs. GATX Corporation | Alta Equipment vs. McGrath RentCorp | Alta Equipment vs. Ryder System |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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