Correlation Between Alamo and Kubota

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

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

Diversification Opportunities for Alamo and Kubota

-0.69

Correlation Coefficient

Alamo  Kubota

Excellent diversification

The 3 months correlation between Alamo and Kubota is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Alamo Group and Kubota in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kubota 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 Kubota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kubota has no effect on the direction of Alamo i.e., Alamo and Kubota go up and down completely randomly.

Pair Corralation between Alamo and Kubota

Considering the 90-day investment horizon Alamo Group is expected to generate 0.97 times more return on investment than Kubota. However, Alamo Group is 1.03 times less risky than Kubota. It trades about 0.03 of its potential returns per unit of risk. Kubota is currently generating about -0.16 per unit of risk. If you would invest  19,349  in Alamo Group on September 18, 2024 and sell it today you would earn a total of  124.50  from holding Alamo Group or generate 0.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Alamo Group  vs.  Kubota

Alamo Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alamo Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Alamo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kubota

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kubota has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alamo and Kubota

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

The idea behind Alamo Group and Kubota 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.