Correlation Between Alta Equipment and Multi Ways

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

Diversification Opportunities for Alta Equipment and Multi Ways

-0.89

Correlation Coefficient

Alta Equipment  Multi Ways

Pay attention - limited upside

The 3 months correlation between Alta and Multi is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and Multi Ways Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Ways Holdings 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 Multi Ways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Ways Holdings has no effect on the direction of Alta Equipment i.e., Alta Equipment and Multi Ways go up and down completely randomly.

Pair Corralation between Alta Equipment and Multi Ways

Assuming the 90 days trading horizon Alta Equipment Group is expected to generate 0.07 times more return on investment than Multi Ways. However, Alta Equipment Group is 15.24 times less risky than Multi Ways. It trades about 0.11 of its potential returns per unit of risk. Multi Ways Holdings is currently generating about -0.07 per unit of risk. If you would invest  2,475  in Alta Equipment Group on September 4, 2024 and sell it today you would earn a total of  79.00  from holding Alta Equipment Group or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Alta Equipment Group  vs.  Multi Ways Holdings

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.

Multi Ways Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multi Ways Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alta Equipment and Multi Ways

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

The idea behind Alta Equipment Group and Multi Ways Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.