Correlation Between Astec Industries and Columbus McKinnon

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

By analyzing existing cross correlation between Astec Industries and Columbus McKinnon, you can compare the effects of market volatilities on Astec Industries and Columbus McKinnon 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 Astec Industries with a short position of Columbus McKinnon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astec Industries and Columbus McKinnon.

Diversification Opportunities for Astec Industries and Columbus McKinnon

0.8

Correlation Coefficient

Astec Industries  Columbus McKinnon

Very poor diversification

The 3 months correlation between Astec and Columbus is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Astec Industries and Columbus McKinnon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbus McKinnon and Astec Industries 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 Astec Industries are associated (or correlated) with Columbus McKinnon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbus McKinnon has no effect on the direction of Astec Industries i.e., Astec Industries and Columbus McKinnon go up and down completely randomly.

Pair Corralation between Astec Industries and Columbus McKinnon

Given the investment horizon of 90 days Astec Industries is expected to generate 1.06 times more return on investment than Columbus McKinnon. However, Astec Industries is 1.06 times more volatile than Columbus McKinnon. It trades about 0.14 of its potential returns per unit of risk. Columbus McKinnon is currently generating about 0.14 per unit of risk. If you would invest  3,173  in Astec Industries on September 3, 2024 and sell it today you would earn a total of  732.00  from holding Astec Industries or generate 23.07% return on investment over 90 days.

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

Astec Industries  vs.  Columbus McKinnon

Astec Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Astec Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Astec Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Columbus McKinnon

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbus McKinnon are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Columbus McKinnon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astec Industries and Columbus McKinnon

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

The idea behind Astec Industries and Columbus McKinnon 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.