Correlation Between Alta Equipment and BOC Aviation

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

By analyzing existing cross correlation between Alta Equipment Group and BOC Aviation Limited, you can compare the effects of market volatilities on Alta Equipment and BOC Aviation 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 Alta Equipment with a short position of BOC Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and BOC Aviation.

Diversification Opportunities for Alta Equipment and BOC Aviation

-0.18

Correlation Coefficient

Alta Equipment  BOC Aviation

Good diversification

The 3 months correlation between Alta and BOC is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and BOC Aviation Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOC Aviation Limited and Alta Equipment 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 Alta Equipment Group are associated (or correlated) with BOC Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOC Aviation Limited has no effect on the direction of Alta Equipment i.e., Alta Equipment and BOC Aviation go up and down completely randomly.

Pair Corralation between Alta Equipment and BOC Aviation

Assuming the 90 days trading horizon Alta Equipment Group is expected to generate 0.32 times more return on investment than BOC Aviation. However, Alta Equipment Group is 3.16 times less risky than BOC Aviation. It trades about 0.1 of its potential returns per unit of risk. BOC Aviation Limited is currently generating about -0.05 per unit of risk. If you would invest  2,511  in Alta Equipment Group on December 28, 2024 and sell it today you would earn a total of  69.00  from holding Alta Equipment Group or generate 2.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Alta Equipment Group  vs.  BOC Aviation Limited

Alta Equipment Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alta Equipment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BOC Aviation Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Alta Equipment and BOC Aviation

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

The idea behind Alta Equipment Group and BOC Aviation Limited 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.