Correlation Between Alamo and Victory Integrity

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

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

Diversification Opportunities for Alamo and Victory Integrity

0.83

Correlation Coefficient

Alamo  Victory Integrity

Very poor diversification

The 3 months correlation between Alamo and Victory is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alamo Group and Victory Integrity Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Integrity 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 Victory Integrity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Integrity has no effect on the direction of Alamo i.e., Alamo and Victory Integrity go up and down completely randomly.

Pair Corralation between Alamo and Victory Integrity

Considering the 90-day investment horizon Alamo Group is expected to generate 1.57 times more return on investment than Victory Integrity. However, Alamo is 1.57 times more volatile than Victory Integrity Smallmid Cap. It trades about 0.06 of its potential returns per unit of risk. Victory Integrity Smallmid Cap is currently generating about -0.03 per unit of risk. If you would invest  19,228  in Alamo Group on September 13, 2024 and sell it today you would earn a total of  306.00  from holding Alamo Group or generate 1.59% return on investment over 90 days.

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

Alamo Group  vs.  Victory Integrity Smallmid Cap

Alamo Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alamo Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Alamo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Victory Integrity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Integrity Smallmid Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Victory Integrity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alamo and Victory Integrity

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

The idea behind Alamo Group and Victory Integrity Smallmid Cap 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.