Correlation Between GATX and Alta Equipment

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Can any of the company-specific risk be diversified away by investing in both GATX 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 GATX and Alta Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GATX Corporation and Alta Equipment Group, you can compare the effects of market volatilities on GATX 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 GATX with a short position of Alta Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GATX and Alta Equipment.

Diversification Opportunities for GATX and Alta Equipment

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between GATX and Alta is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding GATX Corp. 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 GATX 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 GATX Corporation 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 GATX i.e., GATX and Alta Equipment go up and down completely randomly.

Pair Corralation between GATX and Alta Equipment

Given the investment horizon of 90 days GATX is expected to generate 1.46 times less return on investment than Alta Equipment. But when comparing it to its historical volatility, GATX Corporation is 1.84 times less risky than Alta Equipment. It trades about 0.03 of its potential returns per unit of risk. Alta Equipment Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,128  in Alta Equipment Group on December 29, 2023 and sell it today you would earn a total of  161.00  from holding Alta Equipment Group or generate 14.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

GATX Corp.  vs.  Alta Equipment Group

 Performance 
       Timeline  
GATX 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in GATX Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, GATX may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Alta Equipment Group 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alta Equipment reported solid returns over the last few months and may actually be approaching a breakup point.

GATX and Alta Equipment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GATX and Alta Equipment

The main advantage of trading using opposite GATX and Alta Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GATX 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 GATX Corporation 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.
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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.

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