Correlation Between Alta Equipment and Stagwell

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

Diversification Opportunities for Alta Equipment and Stagwell

0.77

Correlation Coefficient

Alta Equipment  Stagwell

Poor diversification

The 3 months correlation between Alta and Stagwell is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell 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 Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of Alta Equipment i.e., Alta Equipment and Stagwell go up and down completely randomly.

Pair Corralation between Alta Equipment and Stagwell

Given the investment horizon of 90 days Alta Equipment Group is expected to generate 1.74 times more return on investment than Stagwell. However, Alta Equipment is 1.74 times more volatile than Stagwell. It trades about 0.08 of its potential returns per unit of risk. Stagwell is currently generating about 0.11 per unit of risk. If you would invest  664.00  in Alta Equipment Group on September 4, 2024 and sell it today you would earn a total of  115.00  from holding Alta Equipment Group or generate 17.32% 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.  Stagwell

Alta Equipment Group

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alta Equipment reported solid returns over the last few months and may actually be approaching a breakup point.

Stagwell

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stagwell are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Stagwell showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alta Equipment and Stagwell

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

The idea behind Alta Equipment Group and Stagwell 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.