Correlation Between Alta Equipment and FlexShopper

Can any of the company-specific risk be diversified away by investing in both Alta Equipment and FlexShopper 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 FlexShopper 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 FlexShopper, you can compare the effects of market volatilities on Alta Equipment and FlexShopper 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 FlexShopper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and FlexShopper.

Diversification Opportunities for Alta Equipment and FlexShopper

0.68

Correlation Coefficient

Alta Equipment  FlexShopper

Poor diversification

The 3 months correlation between Alta and FlexShopper is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and FlexShopper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShopper 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 FlexShopper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShopper has no effect on the direction of Alta Equipment i.e., Alta Equipment and FlexShopper go up and down completely randomly.

Pair Corralation between Alta Equipment and FlexShopper

Assuming the 90 days trading horizon Alta Equipment is expected to generate 24.52 times less return on investment than FlexShopper. But when comparing it to its historical volatility, Alta Equipment Group is 10.41 times less risky than FlexShopper. It trades about 0.11 of its potential returns per unit of risk. FlexShopper is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  107.00  in FlexShopper on September 4, 2024 and sell it today you would earn a total of  111.00  from holding FlexShopper or generate 103.74% return on investment over 90 days.

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

Alta Equipment Group  vs.  FlexShopper

Alta Equipment Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 8 (%) 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.

FlexShopper

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShopper are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, FlexShopper showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alta Equipment and FlexShopper

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

The idea behind Alta Equipment Group and FlexShopper 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.