Correlation Between PACCAR and Manitowoc
Can any of the company-specific risk be diversified away by investing in both PACCAR and Manitowoc 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 Manitowoc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PACCAR Inc and Manitowoc, you can compare the effects of market volatilities on PACCAR and Manitowoc 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 Manitowoc. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and Manitowoc.
Diversification Opportunities for PACCAR and Manitowoc
Very weak diversification
The 3 months correlation between PACCAR and Manitowoc is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Manitowoc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manitowoc 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 Manitowoc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manitowoc has no effect on the direction of PACCAR i.e., PACCAR and Manitowoc go up and down completely randomly.
Pair Corralation between PACCAR and Manitowoc
Given the investment horizon of 90 days PACCAR is expected to generate 1.1 times less return on investment than Manitowoc. But when comparing it to its historical volatility, PACCAR Inc is 1.91 times less risky than Manitowoc. It trades about 0.25 of its potential returns per unit of risk. Manitowoc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 877.00 in Manitowoc on October 20, 2024 and sell it today you would earn a total of 51.00 from holding Manitowoc or generate 5.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PACCAR Inc vs. Manitowoc
Performance |
| Timeline |
| PACCAR Inc |
| Manitowoc |
PACCAR and Manitowoc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PACCAR and Manitowoc
The main advantage of trading using opposite PACCAR and Manitowoc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR position performs unexpectedly, Manitowoc 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 Manitowoc will offset losses from the drop in Manitowoc's long position.The idea behind PACCAR Inc and Manitowoc 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.| Manitowoc vs. Oshkosh | Manitowoc vs. Alamo Group | Manitowoc vs. Wabash National | Manitowoc vs. Hyster Yale Materials Handling |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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