Correlation Between GATX and HE Equipment
Can any of the company-specific risk be diversified away by investing in both GATX and HE Equipment 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 GATX and HE Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GATX Corporation and HE Equipment Services, you can compare the effects of market volatilities on GATX and HE Equipment 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 GATX with a short position of HE Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GATX and HE Equipment.
Diversification Opportunities for GATX and HE Equipment
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GATX and HEES is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding GATX Corp. and HE Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HE Equipment Services and GATX 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 GATX Corporation are associated (or correlated) with HE Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HE Equipment Services has no effect on the direction of GATX i.e., GATX and HE Equipment go up and down completely randomly.
Pair Corralation between GATX and HE Equipment
Given the investment horizon of 90 days GATX is expected to generate 1.16 times less return on investment than HE Equipment. But when comparing it to its historical volatility, GATX Corporation is 1.78 times less risky than HE Equipment. It trades about 0.06 of its potential returns per unit of risk. HE Equipment Services is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,113 in HE Equipment Services on August 23, 2024 and sell it today you would earn a total of 1,555 from holding HE Equipment Services or generate 37.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GATX Corp. vs. HE Equipment Services
Performance |
| Timeline |
| GATX |
| HE Equipment Services |
GATX and HE Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GATX and HE Equipment
The main advantage of trading using opposite GATX and HE Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GATX position performs unexpectedly, HE Equipment 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 HE Equipment will offset losses from the drop in HE Equipment's long position.| GATX vs. Custom Truck One | GATX vs. HE Equipment Services | GATX vs. Alta Equipment Group | GATX vs. McGrath RentCorp |
| HE Equipment vs. GATX Corporation | HE Equipment vs. McGrath RentCorp | HE Equipment vs. Alta Equipment Group | HE Equipment vs. Ryder System |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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