Correlation Between Custom Truck and Vestis

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

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

Diversification Opportunities for Custom Truck and Vestis

0.31

Correlation Coefficient

Custom Truck  Vestis

Weak diversification

The 3 months correlation between Custom and Vestis is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Custom Truck One and Vestis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestis and Custom Truck 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 Custom Truck One are associated (or correlated) with Vestis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestis has no effect on the direction of Custom Truck i.e., Custom Truck and Vestis go up and down completely randomly.

Pair Corralation between Custom Truck and Vestis

Given the investment horizon of 90 days Custom Truck One is expected to generate 1.38 times more return on investment than Vestis. However, Custom Truck is 1.38 times more volatile than Vestis. It trades about 0.16 of its potential returns per unit of risk. Vestis is currently generating about 0.06 per unit of risk. If you would invest  374.00  in Custom Truck One on September 15, 2024 and sell it today you would earn a total of  145.00  from holding Custom Truck One or generate 38.77% return on investment over 90 days.

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

Custom Truck One  vs.  Vestis

Custom Truck One

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Custom Truck One are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Custom Truck unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vestis

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vestis are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vestis may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Custom Truck and Vestis

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

The idea behind Custom Truck One and Vestis 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.