Correlation Between Manitowoc and Alamo

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

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

Diversification Opportunities for Manitowoc and Alamo

0.4

Correlation Coefficient

Manitowoc  Alamo

Very weak diversification

The 3 months correlation between Manitowoc and Alamo is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Manitowoc and Alamo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Group and Manitowoc 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 Manitowoc are associated (or correlated) with Alamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Group has no effect on the direction of Manitowoc i.e., Manitowoc and Alamo go up and down completely randomly.

Pair Corralation between Manitowoc and Alamo

Considering the 90-day investment horizon Manitowoc is expected to generate 0.71 times more return on investment than Alamo. However, Manitowoc is 1.41 times less risky than Alamo. It trades about -0.09 of its potential returns per unit of risk. Alamo Group is currently generating about -0.11 per unit of risk. If you would invest  1,344  in Manitowoc on January 25, 2024 and sell it today you would lose (42.00) from holding Manitowoc or give up 3.12% of portfolio value over 90 days.

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

Manitowoc  vs.  Alamo Group

Manitowoc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manitowoc 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 fairly stable which may send shares a bit higher in May 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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.

Pair Trading with Manitowoc and Alamo

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

The idea behind Manitowoc and Alamo 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.