Correlation Between Terex and Astec Industries

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

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

Diversification Opportunities for Terex and Astec Industries

0.39

Correlation Coefficient

Terex  Astec Industries

Weak diversification

The 3 months correlation between Terex and Astec is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Terex and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries and Terex 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 Terex are associated (or correlated) with Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of Terex i.e., Terex and Astec Industries go up and down completely randomly.

Pair Corralation between Terex and Astec Industries

Considering the 90-day investment horizon Terex is expected to generate 0.57 times more return on investment than Astec Industries. However, Terex is 1.76 times less risky than Astec Industries. It trades about -0.14 of its potential returns per unit of risk. Astec Industries is currently generating about -0.22 per unit of risk. If you would invest  6,500  in Terex on March 8, 2024 and sell it today you would lose (753.00) from holding Terex or give up 11.58% of portfolio value over 90 days.

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

Terex  vs.  Astec Industries

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Astec Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astec Industries 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 rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Terex and Astec Industries

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

The idea behind Terex and Astec Industries 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.