Correlation Between Alamo and Hino Motors

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

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

Diversification Opportunities for Alamo and Hino Motors

-0.2

Correlation Coefficient

Alamo  Hino Motors

Good diversification

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

Pair Corralation between Alamo and Hino Motors

Considering the 90-day investment horizon Alamo Group is expected to generate 0.66 times more return on investment than Hino Motors. However, Alamo Group is 1.52 times less risky than Hino Motors. It trades about -0.05 of its potential returns per unit of risk. Hino Motors Ltd is currently generating about -0.1 per unit of risk. If you would invest  19,618  in Alamo Group on December 17, 2024 and sell it today you would lose (1,027) from holding Alamo Group or give up 5.23% of portfolio value over 90 days.

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

Alamo Group  vs.  Hino Motors Ltd

Alamo Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alamo Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Alamo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Hino Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hino Motors Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alamo and Hino Motors

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

The idea behind Alamo Group and Hino Motors Ltd 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.