Correlation Between Torm PLC and Alta Equipment
Can any of the company-specific risk be diversified away by investing in both Torm PLC and Alta 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 Torm PLC and Alta Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Torm PLC Class and Alta Equipment Group, you can compare the effects of market volatilities on Torm PLC and Alta 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 Torm PLC with a short position of Alta Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Torm PLC and Alta Equipment.
Diversification Opportunities for Torm PLC and Alta Equipment
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Torm and Alta is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Torm PLC Class and Alta Equipment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Equipment Group and Torm PLC 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 Torm PLC Class are associated (or correlated) with Alta Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Equipment Group has no effect on the direction of Torm PLC i.e., Torm PLC and Alta Equipment go up and down completely randomly.
Pair Corralation between Torm PLC and Alta Equipment
Given the investment horizon of 90 days Torm PLC Class is expected to under-perform the Alta Equipment. But the stock apears to be less risky and, when comparing its historical volatility, Torm PLC Class is 1.82 times less risky than Alta Equipment. The stock trades about -0.26 of its potential returns per unit of risk. The Alta Equipment Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 639.00 in Alta Equipment Group on August 30, 2024 and sell it today you would earn a total of 135.00 from holding Alta Equipment Group or generate 21.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Torm PLC Class vs. Alta Equipment Group
Performance |
| Timeline |
| Torm PLC Class |
| Alta Equipment Group |
Torm PLC and Alta Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Torm PLC and Alta Equipment
The main advantage of trading using opposite Torm PLC and Alta Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Torm PLC position performs unexpectedly, Alta 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 Alta Equipment will offset losses from the drop in Alta Equipment's long position.The idea behind Torm PLC Class and Alta Equipment Group 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.| Alta Equipment vs. HE Equipment Services | Alta Equipment vs. GATX Corporation | Alta Equipment vs. McGrath RentCorp | Alta 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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