Correlation Between Cummins and Ametek

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

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

Diversification Opportunities for Cummins and Ametek

0.59

Correlation Coefficient

Cummins  Ametek

Very weak diversification

The 3 months correlation between Cummins and Ametek is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cummins and Ametek Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ametek Inc and Cummins 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 Cummins are associated (or correlated) with Ametek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ametek Inc has no effect on the direction of Cummins i.e., Cummins and Ametek go up and down completely randomly.

Pair Corralation between Cummins and Ametek

Considering the 90-day investment horizon Cummins is expected to under-perform the Ametek. In addition to that, Cummins is 1.52 times more volatile than Ametek Inc. It trades about -0.07 of its total potential returns per unit of risk. Ametek Inc is currently generating about -0.02 per unit of volatility. If you would invest  18,042  in Ametek Inc on December 28, 2024 and sell it today you would lose (352.00) from holding Ametek Inc or give up 1.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Cummins  vs.  Ametek Inc

Cummins

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cummins has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Ametek Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ametek Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Ametek is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cummins and Ametek

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

The idea behind Cummins and Ametek Inc 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.