Correlation Between Lindsay and Alamo

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

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

Diversification Opportunities for Lindsay and Alamo

0.81

Correlation Coefficient

Lindsay  Alamo

Very poor diversification

The 3 months correlation between Lindsay and Alamo is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lindsay and Alamo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Group and Lindsay 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 Lindsay are associated (or correlated) with Alamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Group has no effect on the direction of Lindsay i.e., Lindsay and Alamo go up and down completely randomly.

Pair Corralation between Lindsay and Alamo

Considering the 90-day investment horizon Lindsay is expected to generate 1.05 times more return on investment than Alamo. However, Lindsay is 1.05 times more volatile than Alamo Group. It trades about 0.09 of its potential returns per unit of risk. Alamo Group is currently generating about 0.1 per unit of risk. If you would invest  11,877  in Lindsay on September 3, 2024 and sell it today you would earn a total of  1,400  from holding Lindsay or generate 11.79% return on investment over 90 days.

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

Lindsay  vs.  Alamo Group

Lindsay

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsay are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Lindsay may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alamo Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alamo Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Alamo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lindsay and Alamo

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

The idea behind Lindsay and Alamo Group 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.