Correlation Between Austin Engineering and Astec Industries

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

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

Diversification Opportunities for Austin Engineering and Astec Industries

-0.52

Correlation Coefficient

Austin Engineering  Astec Industries

Excellent diversification

The 3 months correlation between Austin and Astec is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Austin Engineering Limited and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries and Austin Engineering 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 Austin Engineering Limited are associated (or correlated) with Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of Austin Engineering i.e., Austin Engineering and Astec Industries go up and down completely randomly.

Pair Corralation between Austin Engineering and Astec Industries

Assuming the 90 days horizon Austin Engineering Limited is expected to generate 3.42 times more return on investment than Astec Industries. However, Austin Engineering is 3.42 times more volatile than Astec Industries. It trades about 0.03 of its potential returns per unit of risk. Astec Industries is currently generating about -0.17 per unit of risk. If you would invest  30.00  in Austin Engineering Limited on November 28, 2024 and sell it today you would lose (1.00) from holding Austin Engineering Limited or give up 3.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.06%
Values	Daily Returns

Austin Engineering Limited  vs.  Astec Industries

Austin Engineering

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Austin Engineering Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Austin Engineering may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Austin Engineering and Astec Industries

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

The idea behind Austin Engineering Limited and Astec Industries 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.