Correlation Between Alamo and Lindsay
Can any of the company-specific risk be diversified away by investing in both Alamo and Lindsay 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 Alamo and Lindsay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alamo Group and Lindsay, you can compare the effects of market volatilities on Alamo and Lindsay 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 Alamo with a short position of Lindsay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alamo and Lindsay.
Diversification Opportunities for Alamo and Lindsay
Average diversification
The 3 months correlation between Alamo and Lindsay is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Alamo Group and Lindsay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsay and Alamo 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 Alamo Group are associated (or correlated) with Lindsay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsay has no effect on the direction of Alamo i.e., Alamo and Lindsay go up and down completely randomly.
Pair Corralation between Alamo and Lindsay
Considering the 90-day investment horizon Alamo Group is expected to generate 0.84 times more return on investment than Lindsay. However, Alamo Group is 1.2 times less risky than Lindsay. It trades about 0.03 of its potential returns per unit of risk. Lindsay is currently generating about -0.01 per unit of risk. If you would invest 19,044 in Alamo Group on January 24, 2024 and sell it today you would earn a total of 1,417 from holding Alamo Group or generate 7.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alamo Group vs. Lindsay
Performance |
| Timeline |
| Alamo Group |
| Lindsay |
Alamo and Lindsay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alamo and Lindsay
The main advantage of trading using opposite Alamo and Lindsay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alamo position performs unexpectedly, Lindsay 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 Lindsay will offset losses from the drop in Lindsay's long position.The idea behind Alamo Group and Lindsay 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.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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