Correlation Between Alamo and Shyft

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

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

Diversification Opportunities for Alamo and Shyft

0.8

Correlation Coefficient

Alamo  Shyft

Very poor diversification

The 3 months correlation between Alamo and Shyft is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alamo Group and Shyft Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shyft Group 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 Shyft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shyft Group has no effect on the direction of Alamo i.e., Alamo and Shyft go up and down completely randomly.

Pair Corralation between Alamo and Shyft

Considering the 90-day investment horizon Alamo Group is expected to generate 0.3 times more return on investment than Shyft. However, Alamo Group is 3.29 times less risky than Shyft. It trades about -0.07 of its potential returns per unit of risk. Shyft Group is currently generating about -0.1 per unit of risk. If you would invest  19,756  in Alamo Group on November 27, 2024 and sell it today you would lose (1,100) from holding Alamo Group or give up 5.57% of portfolio value over 90 days.

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

Alamo Group  vs.  Shyft Group

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.

Shyft Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shyft Group 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 March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alamo and Shyft

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

The idea behind Alamo Group and Shyft 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.