Correlation Between Custom Truck and Alta Equipment

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

By analyzing existing cross correlation between Custom Truck One and Alta Equipment Group, you can compare the effects of market volatilities on Custom Truck 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 Custom Truck with a short position of Alta Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Custom Truck and Alta Equipment.

Diversification Opportunities for Custom Truck and Alta Equipment

-0.18

Correlation Coefficient

Custom Truck  Alta Equipment

Good diversification

The 3 months correlation between Custom and Alta is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Custom Truck One 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 Custom Truck 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 Custom Truck One 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 Custom Truck i.e., Custom Truck and Alta Equipment go up and down completely randomly.

Pair Corralation between Custom Truck and Alta Equipment

Given the investment horizon of 90 days Custom Truck One is expected to under-perform the Alta Equipment. But the stock apears to be less risky and, when comparing its historical volatility, Custom Truck One is 1.25 times less risky than Alta Equipment. The stock trades about -0.3 of its potential returns per unit of risk. The Alta Equipment Group is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  1,289  in Alta Equipment Group on January 27, 2024 and sell it today you would lose (145.00) from holding Alta Equipment Group or give up 11.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Custom Truck One  vs.  Alta Equipment Group

Custom Truck One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Custom Truck One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Alta Equipment Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Alta Equipment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Custom Truck and Alta Equipment

The main advantage of trading using opposite Custom Truck and Alta Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Custom Truck 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 Custom Truck One 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.