Correlation Between Alamo and Terex

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

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

Diversification Opportunities for Alamo and Terex

0.56

Correlation Coefficient

Alamo  Terex

Very weak diversification

The 3 months correlation between Alamo and Terex is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alamo Group and Terex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terex 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 Terex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terex has no effect on the direction of Alamo i.e., Alamo and Terex go up and down completely randomly.

Pair Corralation between Alamo and Terex

Considering the 90-day investment horizon Alamo Group is expected to under-perform the Terex. In addition to that, Alamo is 1.55 times more volatile than Terex. It trades about -0.11 of its total potential returns per unit of risk. Terex is currently generating about -0.04 per unit of volatility. If you would invest  6,192  in Terex on January 25, 2024 and sell it today you would lose (92.00) from holding Terex or give up 1.49% of portfolio value over 90 days.

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

Alamo Group  vs.  Terex

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 nearly stable essential indicators, Alamo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Terex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Terex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alamo and Terex

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

The idea behind Alamo Group and Terex 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.