Correlation Between Custom Truck and Software Acquisition

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

By analyzing existing cross correlation between Custom Truck One and Software Acquisition Group, you can compare the effects of market volatilities on Custom Truck and Software Acquisition 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 Custom Truck with a short position of Software Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Custom Truck and Software Acquisition.

Diversification Opportunities for Custom Truck and Software Acquisition

0.33

Correlation Coefficient

Custom Truck  Software Acquisition

Weak diversification

The 3 months correlation between Custom and Software is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Custom Truck One and Software Acquisition Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Acquisition and Custom Truck 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 Custom Truck One are associated (or correlated) with Software Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Acquisition has no effect on the direction of Custom Truck i.e., Custom Truck and Software Acquisition go up and down completely randomly.

Pair Corralation between Custom Truck and Software Acquisition

Given the investment horizon of 90 days Custom Truck is expected to generate 14.21 times less return on investment than Software Acquisition. But when comparing it to its historical volatility, Custom Truck One is 11.05 times less risky than Software Acquisition. It trades about 0.17 of its potential returns per unit of risk. Software Acquisition Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Software Acquisition Group on May 15, 2025 and sell it today you would earn a total of  1.35  from holding Software Acquisition Group or generate 135.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	50.0%
Values	Daily Returns

Custom Truck One  vs.  Software Acquisition Group

Custom Truck One

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Custom Truck One are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Custom Truck unveiled solid returns over the last few months and may actually be approaching a breakup point.

Software Acquisition

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Software Acquisition Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Software Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Custom Truck and Software Acquisition

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

The idea behind Custom Truck One and Software Acquisition Group 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..