Correlation Between PACCAR and Sinotruk
Can any of the company-specific risk be diversified away by investing in both PACCAR and Sinotruk 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 PACCAR and Sinotruk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PACCAR Inc and Sinotruk Limited, you can compare the effects of market volatilities on PACCAR and Sinotruk 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 PACCAR with a short position of Sinotruk. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and Sinotruk.
Diversification Opportunities for PACCAR and Sinotruk
Average diversification
The 3 months correlation between PACCAR and Sinotruk is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Sinotruk Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinotruk Limited and PACCAR 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 PACCAR Inc are associated (or correlated) with Sinotruk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinotruk Limited has no effect on the direction of PACCAR i.e., PACCAR and Sinotruk go up and down completely randomly.
Pair Corralation between PACCAR and Sinotruk
Assuming the 90 days horizon PACCAR is expected to generate 1.07 times less return on investment than Sinotruk. But when comparing it to its historical volatility, PACCAR Inc is 1.39 times less risky than Sinotruk. It trades about 0.09 of its potential returns per unit of risk. Sinotruk Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 252.00 in Sinotruk Limited on October 15, 2024 and sell it today you would earn a total of 24.00 from holding Sinotruk Limited or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PACCAR Inc vs. Sinotruk Limited
Performance |
| Timeline |
| PACCAR Inc |
| Sinotruk Limited |
PACCAR and Sinotruk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PACCAR and Sinotruk
The main advantage of trading using opposite PACCAR and Sinotruk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR position performs unexpectedly, Sinotruk 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 Sinotruk will offset losses from the drop in Sinotruk's long position.| PACCAR vs. JAPAN TOBACCO UNSPADR12 | PACCAR vs. CyberArk Software | PACCAR vs. British American Tobacco | PACCAR vs. ASURE SOFTWARE |
| Sinotruk vs. AWILCO DRILLING PLC | Sinotruk vs. Austevoll Seafood ASA | Sinotruk vs. PRECISION DRILLING P | Sinotruk vs. EBRO FOODS |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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