Correlation Between Arts Way and Lindsay
Can any of the company-specific risk be diversified away by investing in both Arts Way and Lindsay 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 Arts Way and Lindsay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arts Way Manufacturing Co and Lindsay, you can compare the effects of market volatilities on Arts Way and Lindsay 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 Arts Way with a short position of Lindsay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arts Way and Lindsay.
Diversification Opportunities for Arts Way and Lindsay
Good diversification
The 3 months correlation between Arts and Lindsay is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Arts Way Manufacturing Co and Lindsay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsay and Arts Way 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 Arts Way Manufacturing Co are associated (or correlated) with Lindsay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsay has no effect on the direction of Arts Way i.e., Arts Way and Lindsay go up and down completely randomly.
Pair Corralation between Arts Way and Lindsay
Given the investment horizon of 90 days Arts Way Manufacturing Co is expected to generate 23.08 times more return on investment than Lindsay. However, Arts Way is 23.08 times more volatile than Lindsay. It trades about 0.04 of its potential returns per unit of risk. Lindsay is currently generating about 0.02 per unit of risk. If you would invest 258.00 in Arts Way Manufacturing Co on August 31, 2024 and sell it today you would lose (88.00) from holding Arts Way Manufacturing Co or give up 34.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arts Way Manufacturing Co vs. Lindsay
Performance |
| Timeline |
| Arts Way Manufacturing |
| Lindsay |
Arts Way and Lindsay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arts Way and Lindsay
The main advantage of trading using opposite Arts Way and Lindsay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arts Way position performs unexpectedly, Lindsay 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 Lindsay will offset losses from the drop in Lindsay's long position.The idea behind Arts Way Manufacturing Co and Lindsay 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.| Lindsay vs. Columbus McKinnon | Lindsay vs. Astec Industries | Lindsay vs. Shyft Group | Lindsay vs. AGCO Corporation |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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