Correlation Between Alta Equipment and Cerberus Cyber

Can any of the company-specific risk be diversified away by investing in both Alta Equipment and Cerberus Cyber 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 Cerberus Cyber 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 Cerberus Cyber Sentinel, you can compare the effects of market volatilities on Alta Equipment and Cerberus Cyber 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 Cerberus Cyber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and Cerberus Cyber.

Diversification Opportunities for Alta Equipment and Cerberus Cyber

0.24

Correlation Coefficient

Alta Equipment  Cerberus Cyber

Modest diversification

The 3 months correlation between Alta and Cerberus is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and Cerberus Cyber Sentinel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerberus Cyber Sentinel 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 Cerberus Cyber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerberus Cyber Sentinel has no effect on the direction of Alta Equipment i.e., Alta Equipment and Cerberus Cyber go up and down completely randomly.

Pair Corralation between Alta Equipment and Cerberus Cyber

Given the investment horizon of 90 days Alta Equipment Group is expected to generate 0.44 times more return on investment than Cerberus Cyber. However, Alta Equipment Group is 2.25 times less risky than Cerberus Cyber. It trades about -0.09 of its potential returns per unit of risk. Cerberus Cyber Sentinel is currently generating about -0.28 per unit of risk. If you would invest  647.00  in Alta Equipment Group on December 29, 2024 and sell it today you would lose (153.00) from holding Alta Equipment Group or give up 23.65% of portfolio value over 90 days.

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

Alta Equipment Group  vs.  Cerberus Cyber Sentinel

Alta Equipment Group

Risk-Adjusted Performance

Very Weak

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

Cerberus Cyber Sentinel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cerberus Cyber Sentinel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Alta Equipment and Cerberus Cyber

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

The idea behind Alta Equipment Group and Cerberus Cyber Sentinel 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.