Correlation Between Alta Equipment and Atlanticus Holdings

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

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

Diversification Opportunities for Alta Equipment and Atlanticus Holdings

0.56

Correlation Coefficient

Alta Equipment  Atlanticus Holdings

Very weak diversification

The 3 months correlation between Alta and Atlanticus is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and Atlanticus Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlanticus Holdings Corp and Alta Equipment 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 Alta Equipment Group are associated (or correlated) with Atlanticus Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlanticus Holdings Corp has no effect on the direction of Alta Equipment i.e., Alta Equipment and Atlanticus Holdings go up and down completely randomly.

Pair Corralation between Alta Equipment and Atlanticus Holdings

Assuming the 90 days trading horizon Alta Equipment is expected to generate 1.27 times less return on investment than Atlanticus Holdings. But when comparing it to its historical volatility, Alta Equipment Group is 1.42 times less risky than Atlanticus Holdings. It trades about 0.16 of its potential returns per unit of risk. Atlanticus Holdings Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,225  in Atlanticus Holdings Corp on September 13, 2024 and sell it today you would earn a total of  149.00  from holding Atlanticus Holdings Corp or generate 6.7% return on investment over 90 days.

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

Alta Equipment Group  vs.  Atlanticus Holdings Corp

Alta Equipment Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alta Equipment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Atlanticus Holdings Corp

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atlanticus Holdings Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Atlanticus Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alta Equipment and Atlanticus Holdings

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

The idea behind Alta Equipment Group and Atlanticus Holdings Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.