Correlation Between Astec Industries and Arts Way

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

By analyzing existing cross correlation between Astec Industries and Arts Way Manufacturing Co, you can compare the effects of market volatilities on Astec Industries and Arts Way 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 Astec Industries with a short position of Arts Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astec Industries and Arts Way.

Diversification Opportunities for Astec Industries and Arts Way

-0.28

Correlation Coefficient

Astec Industries  Arts Way

Very good diversification

The 3 months correlation between Astec and Arts is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Astec Industries and Arts Way Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arts Way Manufacturing and Astec Industries 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 Astec Industries are associated (or correlated) with Arts Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arts Way Manufacturing has no effect on the direction of Astec Industries i.e., Astec Industries and Arts Way go up and down completely randomly.

Pair Corralation between Astec Industries and Arts Way

Given the investment horizon of 90 days Astec Industries is expected to generate 1.19 times more return on investment than Arts Way. However, Astec Industries is 1.19 times more volatile than Arts Way Manufacturing Co. It trades about 0.06 of its potential returns per unit of risk. Arts Way Manufacturing Co is currently generating about -0.08 per unit of risk. If you would invest  3,294  in Astec Industries on December 5, 2024 and sell it today you would earn a total of  122.00  from holding Astec Industries or generate 3.7% return on investment over 90 days.

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

Astec Industries  vs.  Arts Way Manufacturing Co

Astec Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Astec Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Arts Way Manufacturing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arts Way Manufacturing Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Arts Way showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astec Industries and Arts Way

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

The idea behind Astec Industries and Arts Way Manufacturing Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.