Correlation Between Anderson Industrial and Roundtop Machinery

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

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

Diversification Opportunities for Anderson Industrial and Roundtop Machinery

0.41

Correlation Coefficient

Anderson Industrial  Roundtop Machinery

Very weak diversification

The 3 months correlation between Anderson and Roundtop is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Anderson Industrial Corp and Roundtop Machinery Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundtop Machinery and Anderson Industrial 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 Anderson Industrial Corp are associated (or correlated) with Roundtop Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundtop Machinery has no effect on the direction of Anderson Industrial i.e., Anderson Industrial and Roundtop Machinery go up and down completely randomly.

Pair Corralation between Anderson Industrial and Roundtop Machinery

Assuming the 90 days trading horizon Anderson Industrial Corp is expected to generate 1.44 times more return on investment than Roundtop Machinery. However, Anderson Industrial is 1.44 times more volatile than Roundtop Machinery Industries. It trades about 0.04 of its potential returns per unit of risk. Roundtop Machinery Industries is currently generating about -0.07 per unit of risk. If you would invest  1,355  in Anderson Industrial Corp on October 10, 2024 and sell it today you would earn a total of  80.00  from holding Anderson Industrial Corp or generate 5.9% return on investment over 90 days.

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

Anderson Industrial Corp  vs.  Roundtop Machinery Industries

Anderson Industrial Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anderson Industrial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Anderson Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Roundtop Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roundtop Machinery Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Anderson Industrial and Roundtop Machinery

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

The idea behind Anderson Industrial Corp and Roundtop Machinery Industries 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.