Correlation Between Fortress Transp and PACCAR

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

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

Diversification Opportunities for Fortress Transp and PACCAR

0.67

Correlation Coefficient

Fortress Transp  PACCAR

Poor diversification

The 3 months correlation between Fortress and PACCAR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Transp Infra and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and Fortress Transp 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 Fortress Transp Infra are associated (or correlated) with PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Fortress Transp i.e., Fortress Transp and PACCAR go up and down completely randomly.

Pair Corralation between Fortress Transp and PACCAR

Given the investment horizon of 90 days Fortress Transp Infra is expected to generate 1.73 times more return on investment than PACCAR. However, Fortress Transp is 1.73 times more volatile than PACCAR Inc. It trades about 0.17 of its potential returns per unit of risk. PACCAR Inc is currently generating about 0.06 per unit of risk. If you would invest  3,597  in Fortress Transp Infra on October 4, 2024 and sell it today you would earn a total of  10,807  from holding Fortress Transp Infra or generate 300.44% return on investment over 90 days.

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

Fortress Transp Infra  vs.  PACCAR Inc

Fortress Transp Infra

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Transp Infra are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Fortress Transp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PACCAR Inc

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, PACCAR is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fortress Transp and PACCAR

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

The idea behind Fortress Transp Infra and PACCAR 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.