Correlation Between CRA International and Alamo
Can any of the company-specific risk be diversified away by investing in both CRA International and Alamo 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 CRA International and Alamo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CRA International and Alamo Group, you can compare the effects of market volatilities on CRA International and Alamo 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 CRA International with a short position of Alamo. Check out your portfolio center. Please also check ongoing floating volatility patterns of CRA International and Alamo.
Diversification Opportunities for CRA International and Alamo
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CRA and Alamo is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and Alamo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Group and CRA International 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 CRA International are associated (or correlated) with Alamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Group has no effect on the direction of CRA International i.e., CRA International and Alamo go up and down completely randomly.
Pair Corralation between CRA International and Alamo
Given the investment horizon of 90 days CRA International is expected to generate 1.08 times more return on investment than Alamo. However, CRA International is 1.08 times more volatile than Alamo Group. It trades about 0.06 of its potential returns per unit of risk. Alamo Group is currently generating about 0.05 per unit of risk. If you would invest 11,530 in CRA International on August 28, 2024 and sell it today you would earn a total of 7,895 from holding CRA International or generate 68.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CRA International vs. Alamo Group
Performance |
| Timeline |
| CRA International |
| Alamo Group |
CRA International and Alamo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CRA International and Alamo
The main advantage of trading using opposite CRA International and Alamo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CRA International position performs unexpectedly, Alamo 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 Alamo will offset losses from the drop in Alamo's long position.| CRA International vs. Franklin Covey | CRA International vs. ICF International | CRA International vs. Huron Consulting Group | CRA International vs. FTI Consulting |
| Alamo vs. Lion Electric Corp | Alamo vs. Xos Inc | Alamo vs. Hydrofarm Holdings Group | Alamo 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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