Correlation Between Shyft and PACCAR

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

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

Diversification Opportunities for Shyft and PACCAR

0.77

Correlation Coefficient

Shyft  PACCAR

Poor diversification

The 3 months correlation between Shyft and PACCAR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Shyft Group and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and Shyft 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 The Shyft Group are associated (or correlated) with PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Shyft i.e., Shyft and PACCAR go up and down completely randomly.

Pair Corralation between Shyft and PACCAR

Assuming the 90 days horizon The Shyft Group is expected to under-perform the PACCAR. In addition to that, Shyft is 2.47 times more volatile than PACCAR Inc. It trades about -0.23 of its total potential returns per unit of risk. PACCAR Inc is currently generating about -0.21 per unit of volatility. If you would invest  10,662  in PACCAR Inc on September 29, 2024 and sell it today you would lose (642.00) from holding PACCAR Inc or give up 6.02% of portfolio value over 90 days.

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

The Shyft Group  vs.  PACCAR Inc

Shyft Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Shyft Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Shyft is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PACCAR Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shyft and PACCAR

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

The idea behind The Shyft Group and PACCAR Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.