Correlation Between PACCAR and Rand Capital

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

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

Diversification Opportunities for PACCAR and Rand Capital

0.16

Correlation Coefficient

PACCAR  Rand Capital

Average diversification

The 3 months correlation between PACCAR and Rand is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Rand Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rand Capital 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 Rand Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rand Capital Corp has no effect on the direction of PACCAR i.e., PACCAR and Rand Capital go up and down completely randomly.

Pair Corralation between PACCAR and Rand Capital

Given the investment horizon of 90 days PACCAR is expected to generate 1.79 times less return on investment than Rand Capital. But when comparing it to its historical volatility, PACCAR Inc is 2.56 times less risky than Rand Capital. It trades about 0.08 of its potential returns per unit of risk. Rand Capital Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  984.00  in Rand Capital Corp on September 28, 2024 and sell it today you would earn a total of  831.00  from holding Rand Capital Corp or generate 84.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.31%
Values	Daily Returns

PACCAR Inc  vs.  Rand Capital Corp

PACCAR Inc

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PACCAR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rand Capital Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rand Capital Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rand Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PACCAR and Rand Capital

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

The idea behind PACCAR Inc and Rand Capital 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.