Correlation Between Alamo and Lindsay

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

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

Diversification Opportunities for Alamo and Lindsay

0.79

Correlation Coefficient

Alamo  Lindsay

Poor diversification

The 3 months correlation between Alamo and Lindsay is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alamo Group and Lindsay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsay 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 Lindsay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsay has no effect on the direction of Alamo i.e., Alamo and Lindsay go up and down completely randomly.

Pair Corralation between Alamo and Lindsay

Considering the 90-day investment horizon Alamo Group is expected to generate 0.95 times more return on investment than Lindsay. However, Alamo Group is 1.05 times less risky than Lindsay. It trades about 0.11 of its potential returns per unit of risk. Lindsay is currently generating about 0.07 per unit of risk. If you would invest  17,987  in Alamo Group on August 30, 2024 and sell it today you would earn a total of  1,802  from holding Alamo Group or generate 10.02% return on investment over 90 days.

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

Alamo Group  vs.  Lindsay

Alamo Group

Risk-Adjusted Performance

4 of 100

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 unfluctuating essential indicators, Alamo may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Lindsay

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsay are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Lindsay may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Alamo and Lindsay

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

The idea behind Alamo Group and Lindsay 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.