Correlation Between Alta Equipment and Arena Group

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

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

Diversification Opportunities for Alta Equipment and Arena Group

-0.2

Correlation Coefficient

Alta Equipment  Arena Group

Good diversification

The 3 months correlation between Alta and Arena is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and Arena Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Group Holdings and Alta Equipment 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 Alta Equipment Group are associated (or correlated) with Arena Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Group Holdings has no effect on the direction of Alta Equipment i.e., Alta Equipment and Arena Group go up and down completely randomly.

Pair Corralation between Alta Equipment and Arena Group

Given the investment horizon of 90 days Alta Equipment Group is expected to generate 0.92 times more return on investment than Arena Group. However, Alta Equipment Group is 1.09 times less risky than Arena Group. It trades about 0.18 of its potential returns per unit of risk. Arena Group Holdings is currently generating about -0.17 per unit of risk. If you would invest  597.00  in Alta Equipment Group on August 12, 2024 and sell it today you would earn a total of  194.00  from holding Alta Equipment Group or generate 32.5% return on investment over 90 days.

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

Alta Equipment Group  vs.  Arena Group Holdings

Alta Equipment Group

Risk-Adjusted Performance

11 of 100

Good

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

Arena Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arena Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Alta Equipment and Arena Group

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

The idea behind Alta Equipment Group and Arena Group Holdings 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.