Correlation Between PACCAR and Iris Acquisition

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

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

Diversification Opportunities for PACCAR and Iris Acquisition

-0.7

Correlation Coefficient

PACCAR  Iris Acquisition

Excellent diversification

The 3 months correlation between PACCAR and Iris is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Iris Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Acquisition Corp and PACCAR 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 PACCAR Inc are associated (or correlated) with Iris Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Acquisition Corp has no effect on the direction of PACCAR i.e., PACCAR and Iris Acquisition go up and down completely randomly.

Pair Corralation between PACCAR and Iris Acquisition

Given the investment horizon of 90 days PACCAR Inc is expected to generate 1.04 times more return on investment than Iris Acquisition. However, PACCAR is 1.04 times more volatile than Iris Acquisition Corp. It trades about 0.06 of its potential returns per unit of risk. Iris Acquisition Corp is currently generating about 0.01 per unit of risk. If you would invest  9,469  in PACCAR Inc on September 13, 2024 and sell it today you would earn a total of  2,116  from holding PACCAR Inc or generate 22.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	73.79%
Values	Daily Returns

PACCAR Inc  vs.  Iris Acquisition Corp

PACCAR Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Iris Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iris Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iris Acquisition is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PACCAR and Iris Acquisition

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

The idea behind PACCAR Inc and Iris Acquisition Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..