Correlation Between Donaldson and Altra Industrial
Can any of the company-specific risk be diversified away by investing in both Donaldson and Altra Industrial 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 Donaldson and Altra Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Donaldson and Altra Industrial Motion, you can compare the effects of market volatilities on Donaldson and Altra Industrial 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 Donaldson with a short position of Altra Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donaldson and Altra Industrial.
Diversification Opportunities for Donaldson and Altra Industrial
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Donaldson and Altra is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Donaldson and Altra Industrial Motion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altra Industrial Motion and Donaldson 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 Donaldson are associated (or correlated) with Altra Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altra Industrial Motion has no effect on the direction of Donaldson i.e., Donaldson and Altra Industrial go up and down completely randomly.
Pair Corralation between Donaldson and Altra Industrial
If you would invest 7,316 in Donaldson on September 1, 2024 and sell it today you would earn a total of 489.00 from holding Donaldson or generate 6.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 4.76% |
| Values | Daily Returns |
Donaldson vs. Altra Industrial Motion
Performance |
| Timeline |
| Donaldson |
| Altra Industrial Motion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Donaldson and Altra Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Donaldson and Altra Industrial
The main advantage of trading using opposite Donaldson and Altra Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donaldson position performs unexpectedly, Altra Industrial 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 Altra Industrial will offset losses from the drop in Altra Industrial's long position.The idea behind Donaldson and Altra Industrial Motion 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.| Altra Industrial vs. Franklin Electric Co | Altra Industrial vs. Donaldson | Altra Industrial vs. John Bean Technologies | Altra Industrial vs. ITT Inc |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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