Correlation Between Where Food and PACCAR

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

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

Diversification Opportunities for Where Food and PACCAR

0.58

Correlation Coefficient

Where Food  PACCAR

Very weak diversification

The 3 months correlation between Where and PACCAR is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Where Food Comes and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and Where Food 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 Where Food Comes 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 Where Food i.e., Where Food and PACCAR go up and down completely randomly.

Pair Corralation between Where Food and PACCAR

Given the investment horizon of 90 days Where Food Comes is expected to generate 1.12 times more return on investment than PACCAR. However, Where Food is 1.12 times more volatile than PACCAR Inc. It trades about 0.16 of its potential returns per unit of risk. PACCAR Inc is currently generating about 0.09 per unit of risk. If you would invest  1,078  in Where Food Comes on September 28, 2024 and sell it today you would earn a total of  217.00  from holding Where Food Comes or generate 20.13% return on investment over 90 days.

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

Where Food Comes  vs.  PACCAR Inc

Where Food Comes

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Where Food Comes are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Where Food reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Where Food and PACCAR

The main advantage of trading using opposite Where Food and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Where Food 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 Where Food Comes 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.