Correlation Between Cummins and ATS

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Can any of the company-specific risk be diversified away by investing in both Cummins and ATS 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 ATS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cummins and ATS Corporation, you can compare the effects of market volatilities on Cummins and ATS 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 ATS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cummins and ATS.

Diversification Opportunities for Cummins and ATS

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cummins and ATS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cummins and ATS Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATS Corporation 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 ATS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATS Corporation has no effect on the direction of Cummins i.e., Cummins and ATS go up and down completely randomly.

Pair Corralation between Cummins and ATS

Considering the 90-day investment horizon Cummins is expected to generate 0.74 times more return on investment than ATS. However, Cummins is 1.35 times less risky than ATS. It trades about 0.07 of its potential returns per unit of risk. ATS Corporation is currently generating about 0.0 per unit of risk. If you would invest  23,344  in Cummins on August 27, 2024 and sell it today you would earn a total of  13,918  from holding Cummins or generate 59.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Cummins  vs.  ATS Corp.

 Performance 
       Timeline  
Cummins 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Cummins are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, Cummins demonstrated solid returns over the last few months and may actually be approaching a breakup point.
ATS Corporation 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ATS Corporation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, ATS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cummins and ATS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cummins and ATS

The main advantage of trading using opposite Cummins and ATS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cummins position performs unexpectedly, ATS 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 ATS will offset losses from the drop in ATS's long position.
The idea behind Cummins and ATS Corporation 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.
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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