Correlation Between HNI Corp and PACCAR

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

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

Diversification Opportunities for HNI Corp and PACCAR

0.69

Correlation Coefficient

HNI Corp  PACCAR

Poor diversification

The 3 months correlation between HNI and PACCAR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding HNI Corp and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and HNI Corp 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 HNI Corp 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 HNI Corp i.e., HNI Corp and PACCAR go up and down completely randomly.

Pair Corralation between HNI Corp and PACCAR

Considering the 90-day investment horizon HNI Corp is expected to generate 0.78 times more return on investment than PACCAR. However, HNI Corp is 1.28 times less risky than PACCAR. It trades about 0.31 of its potential returns per unit of risk. PACCAR Inc is currently generating about 0.18 per unit of risk. If you would invest  4,988  in HNI Corp on August 30, 2024 and sell it today you would earn a total of  639.00  from holding HNI Corp or generate 12.81% return on investment over 90 days.

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

HNI Corp  vs.  PACCAR Inc

HNI Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HNI Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, HNI Corp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

PACCAR Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HNI Corp and PACCAR

The main advantage of trading using opposite HNI Corp and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNI Corp 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 HNI Corp 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.