Correlation Between Wabash National and Manitowoc

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

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

Diversification Opportunities for Wabash National and Manitowoc

0.61

Correlation Coefficient

Wabash National  Manitowoc

Poor diversification

The 3 months correlation between Wabash and Manitowoc is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and Manitowoc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manitowoc and Wabash National 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 Wabash National are associated (or correlated) with Manitowoc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manitowoc has no effect on the direction of Wabash National i.e., Wabash National and Manitowoc go up and down completely randomly.

Pair Corralation between Wabash National and Manitowoc

Considering the 90-day investment horizon Wabash National is expected to generate 2.17 times less return on investment than Manitowoc. But when comparing it to its historical volatility, Wabash National is 1.71 times less risky than Manitowoc. It trades about 0.04 of its potential returns per unit of risk. Manitowoc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  976.00  in Manitowoc on September 3, 2024 and sell it today you would earn a total of  87.00  from holding Manitowoc or generate 8.91% return on investment over 90 days.

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

Wabash National  vs.  Manitowoc

Wabash National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Manitowoc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Manitowoc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Manitowoc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wabash National and Manitowoc

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

The idea behind Wabash National and Manitowoc 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.