Correlation Between GATX and Alpha One

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

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

Diversification Opportunities for GATX and Alpha One

-0.21

Correlation Coefficient

GATX  Alpha One

Very good diversification

The 3 months correlation between GATX and Alpha is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding GATX Corp. and Alpha One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha One and GATX 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 GATX Corporation are associated (or correlated) with Alpha One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha One has no effect on the direction of GATX i.e., GATX and Alpha One go up and down completely randomly.

Pair Corralation between GATX and Alpha One

Given the investment horizon of 90 days GATX Corporation is expected to generate 0.38 times more return on investment than Alpha One. However, GATX Corporation is 2.63 times less risky than Alpha One. It trades about 0.13 of its potential returns per unit of risk. Alpha One is currently generating about -0.12 per unit of risk. If you would invest  13,316  in GATX Corporation on October 8, 2024 and sell it today you would earn a total of  1,967  from holding GATX Corporation or generate 14.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

GATX Corp.  vs.  Alpha One

GATX

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GATX Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, GATX showed solid returns over the last few months and may actually be approaching a breakup point.

Alpha One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with GATX and Alpha One

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

The idea behind GATX Corporation and Alpha One 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.