Correlation Between Cerberus Cyber and Alta Equipment

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

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

Diversification Opportunities for Cerberus Cyber and Alta Equipment

0.44

Correlation Coefficient

Cerberus Cyber  Alta Equipment

Very weak diversification

The 3 months correlation between Cerberus and Alta is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cerberus Cyber Sentinel and Alta Equipment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Equipment Group and Cerberus Cyber 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 Cerberus Cyber Sentinel are associated (or correlated) with Alta Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Equipment Group has no effect on the direction of Cerberus Cyber i.e., Cerberus Cyber and Alta Equipment go up and down completely randomly.

Pair Corralation between Cerberus Cyber and Alta Equipment

Given the investment horizon of 90 days Cerberus Cyber Sentinel is expected to generate 1.32 times more return on investment than Alta Equipment. However, Cerberus Cyber is 1.32 times more volatile than Alta Equipment Group. It trades about 0.39 of its potential returns per unit of risk. Alta Equipment Group is currently generating about 0.2 per unit of risk. If you would invest  80.00  in Cerberus Cyber Sentinel on August 31, 2024 and sell it today you would earn a total of  54.00  from holding Cerberus Cyber Sentinel or generate 67.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Cerberus Cyber Sentinel  vs.  Alta Equipment Group

Cerberus Cyber Sentinel

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cerberus Cyber Sentinel are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Cerberus Cyber displayed solid returns over the last few months and may actually be approaching a breakup point.

Alta Equipment Group

Risk-Adjusted Performance

7 of 100

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 nearly fragile basic indicators, Alta Equipment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cerberus Cyber and Alta Equipment

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

The idea behind Cerberus Cyber Sentinel and Alta Equipment 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.