Correlation Between PACCAR and Astec Industries
Can any of the company-specific risk be diversified away by investing in both PACCAR and Astec Industries 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 Astec Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PACCAR Inc and Astec Industries, you can compare the effects of market volatilities on PACCAR and Astec Industries 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 Astec Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and Astec Industries.
Diversification Opportunities for PACCAR and Astec Industries
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PACCAR and Astec is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries 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 Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of PACCAR i.e., PACCAR and Astec Industries go up and down completely randomly.
Pair Corralation between PACCAR and Astec Industries
Given the investment horizon of 90 days PACCAR Inc is expected to generate 0.41 times more return on investment than Astec Industries. However, PACCAR Inc is 2.46 times less risky than Astec Industries. It trades about -0.21 of its potential returns per unit of risk. Astec Industries is currently generating about -0.2 per unit of risk. If you would invest 11,869 in PACCAR Inc on February 10, 2024 and sell it today you would lose (977.00) from holding PACCAR Inc or give up 8.23% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.65% |
Values | Daily Returns |
PACCAR Inc vs. Astec Industries
Performance |
Timeline |
PACCAR Inc |
Astec Industries |
PACCAR and Astec Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PACCAR and Astec Industries
The main advantage of trading using opposite PACCAR and Astec Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR position performs unexpectedly, Astec Industries 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 Astec Industries will offset losses from the drop in Astec Industries' long position.PACCAR vs. Hydrofarm Holdings GroupInc | PACCAR vs. Caterpillar | PACCAR vs. AGCO Corporation | PACCAR vs. CNH Industrial NV |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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