Correlation Between Alamo and CRA International

Can any of the company-specific risk be diversified away by investing in both Alamo and CRA International 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 CRA International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alamo Group and CRA International, you can compare the effects of market volatilities on Alamo and CRA International 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 CRA International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alamo and CRA International.

Diversification Opportunities for Alamo and CRA International

-0.25

Correlation Coefficient

Alamo  CRA International

Very good diversification

The 3 months correlation between Alamo and CRA is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Alamo Group and CRA International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRA International 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 CRA International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRA International has no effect on the direction of Alamo i.e., Alamo and CRA International go up and down completely randomly.

Pair Corralation between Alamo and CRA International

Considering the 90-day investment horizon Alamo Group is expected to under-perform the CRA International. In addition to that, Alamo is 1.15 times more volatile than CRA International. It trades about -0.31 of its total potential returns per unit of risk. CRA International is currently generating about 0.18 per unit of volatility. If you would invest  14,639  in CRA International on February 4, 2024 and sell it today you would earn a total of  743.00  from holding CRA International or generate 5.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alamo Group  vs.  CRA International

Alamo Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alamo Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CRA International

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CRA International are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CRA International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alamo and CRA International

The main advantage of trading using opposite Alamo and CRA International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alamo position performs unexpectedly, CRA International 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 CRA International will offset losses from the drop in CRA International's long position.

The idea behind Alamo Group and CRA International 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.