Correlation Between Daimler Truck and Oshkosh

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

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

Diversification Opportunities for Daimler Truck and Oshkosh

0.3

Correlation Coefficient

Daimler Truck  Oshkosh

Weak diversification

The 3 months correlation between Daimler and Oshkosh is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Daimler Truck Holding and Oshkosh in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oshkosh and Daimler Truck 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 Daimler Truck Holding are associated (or correlated) with Oshkosh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oshkosh has no effect on the direction of Daimler Truck i.e., Daimler Truck and Oshkosh go up and down completely randomly.

Pair Corralation between Daimler Truck and Oshkosh

Assuming the 90 days horizon Daimler Truck Holding is expected to generate 1.19 times more return on investment than Oshkosh. However, Daimler Truck is 1.19 times more volatile than Oshkosh. It trades about 0.02 of its potential returns per unit of risk. Oshkosh is currently generating about -0.23 per unit of risk. If you would invest  1,933  in Daimler Truck Holding on September 16, 2024 and sell it today you would earn a total of  7.00  from holding Daimler Truck Holding or generate 0.36% return on investment over 90 days.

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

Daimler Truck Holding  vs.  Oshkosh

Daimler Truck Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daimler Truck Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Daimler Truck showed solid returns over the last few months and may actually be approaching a breakup point.

Oshkosh

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oshkosh has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Oshkosh is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Daimler Truck and Oshkosh

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

The idea behind Daimler Truck Holding and Oshkosh 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.