Correlation Between Great Lakes and AGCO
Can any of the company-specific risk be diversified away by investing in both Great Lakes and AGCO 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 Great Lakes and AGCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Lakes Dredge and AGCO Corporation, you can compare the effects of market volatilities on Great Lakes and AGCO 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 Great Lakes with a short position of AGCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Lakes and AGCO.
Diversification Opportunities for Great Lakes and AGCO
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Great and AGCO is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Dredge and AGCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGCO and Great Lakes 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 Great Lakes Dredge are associated (or correlated) with AGCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGCO has no effect on the direction of Great Lakes i.e., Great Lakes and AGCO go up and down completely randomly.
Pair Corralation between Great Lakes and AGCO
Given the investment horizon of 90 days Great Lakes Dredge is expected to generate 0.75 times more return on investment than AGCO. However, Great Lakes Dredge is 1.33 times less risky than AGCO. It trades about 0.19 of its potential returns per unit of risk. AGCO Corporation is currently generating about -0.02 per unit of risk. If you would invest 1,152 in Great Lakes Dredge on August 29, 2024 and sell it today you would earn a total of 101.00 from holding Great Lakes Dredge or generate 8.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Lakes Dredge vs. AGCO Corp.
Performance |
| Timeline |
| Great Lakes Dredge |
| AGCO |
Great Lakes and AGCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Lakes and AGCO
The main advantage of trading using opposite Great Lakes and AGCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Lakes position performs unexpectedly, AGCO 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 AGCO will offset losses from the drop in AGCO's long position.| Great Lakes vs. Primoris Services | Great Lakes vs. Granite Construction Incorporated | Great Lakes vs. MYR Group | Great Lakes vs. Southland Holdings |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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