Correlation Between PACCAR and Alamo

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

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

Diversification Opportunities for PACCAR and Alamo

0.57

Correlation Coefficient

PACCAR  Alamo

Very weak diversification

The 3 months correlation between PACCAR and Alamo is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Alamo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Group and PACCAR 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 PACCAR Inc are associated (or correlated) with Alamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Group has no effect on the direction of PACCAR i.e., PACCAR and Alamo go up and down completely randomly.

Pair Corralation between PACCAR and Alamo

Given the investment horizon of 90 days PACCAR Inc is expected to under-perform the Alamo. In addition to that, PACCAR is 1.03 times more volatile than Alamo Group. It trades about -0.05 of its total potential returns per unit of risk. Alamo Group is currently generating about 0.06 per unit of volatility. If you would invest  18,854  in Alamo Group on February 19, 2025 and sell it today you would earn a total of  1,520  from holding Alamo Group or generate 8.06% return on investment over 90 days.

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

PACCAR Inc  vs.  Alamo Group

PACCAR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACCAR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Alamo Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alamo Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Alamo may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with PACCAR and Alamo

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

The idea behind PACCAR Inc and Alamo 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.