Correlation Between PACCAR and D’Ieteren
Can any of the company-specific risk be diversified away by investing in both PACCAR and D’Ieteren 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 D’Ieteren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PACCAR Inc and DIeteren NV ADR, you can compare the effects of market volatilities on PACCAR and D’Ieteren 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 D’Ieteren. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and D’Ieteren.
Diversification Opportunities for PACCAR and D’Ieteren
Excellent diversification
The 3 months correlation between PACCAR and D’Ieteren is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and DIeteren NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIeteren NV ADR 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 D’Ieteren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIeteren NV ADR has no effect on the direction of PACCAR i.e., PACCAR and D’Ieteren go up and down completely randomly.
Pair Corralation between PACCAR and D’Ieteren
Given the investment horizon of 90 days PACCAR is expected to generate 1.09 times less return on investment than D’Ieteren. But when comparing it to its historical volatility, PACCAR Inc is 1.38 times less risky than D’Ieteren. It trades about 0.08 of its potential returns per unit of risk. DIeteren NV ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,266 in DIeteren NV ADR on September 4, 2024 and sell it today you would earn a total of 2,538 from holding DIeteren NV ADR or generate 30.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 78.62% |
| Values | Daily Returns |
PACCAR Inc vs. DIeteren NV ADR
Performance |
| Timeline |
| PACCAR Inc |
| DIeteren NV ADR |
PACCAR and D’Ieteren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PACCAR and D’Ieteren
The main advantage of trading using opposite PACCAR and D’Ieteren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR position performs unexpectedly, D’Ieteren 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 D’Ieteren will offset losses from the drop in D’Ieteren's long position.The idea behind PACCAR Inc and DIeteren NV ADR 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.| D’Ieteren vs. Consumer Automotive Finance | D’Ieteren vs. Vroom Inc | D’Ieteren vs. AutoCanada | D’Ieteren vs. Kaixin Auto 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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