Correlation Between Cummins and Ametek
Can any of the company-specific risk be diversified away by investing in both Cummins and Ametek 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 Cummins and Ametek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cummins and Ametek Inc, you can compare the effects of market volatilities on Cummins and Ametek 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 Cummins with a short position of Ametek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cummins and Ametek.
Diversification Opportunities for Cummins and Ametek
Very poor diversification
The 3 months correlation between Cummins and Ametek is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cummins and Ametek Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ametek Inc and Cummins 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 Cummins are associated (or correlated) with Ametek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ametek Inc has no effect on the direction of Cummins i.e., Cummins and Ametek go up and down completely randomly.
Pair Corralation between Cummins and Ametek
Considering the 90-day investment horizon Cummins is expected to generate 1.43 times less return on investment than Ametek. But when comparing it to its historical volatility, Cummins is 1.0 times less risky than Ametek. It trades about 0.25 of its potential returns per unit of risk. Ametek Inc is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 16,667 in Ametek Inc on August 24, 2024 and sell it today you would earn a total of 2,909 from holding Ametek Inc or generate 17.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cummins vs. Ametek Inc
Performance |
| Timeline |
| Cummins |
| Ametek Inc |
Cummins and Ametek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cummins and Ametek
The main advantage of trading using opposite Cummins and Ametek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cummins position performs unexpectedly, Ametek 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 Ametek will offset losses from the drop in Ametek's long position.| Cummins vs. Small Cap Core | Cummins vs. Freedom Holding Corp | Cummins vs. Gfl Environmental Holdings | Cummins vs. Growth Fund Of |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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