Correlation Between HE Equipment and Alta Equipment

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

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

Diversification Opportunities for HE Equipment and Alta Equipment

-0.25

Correlation Coefficient

HE Equipment  Alta Equipment

Very good diversification

The 3 months correlation between HEES and Alta is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services 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 HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Alta Equipment go up and down completely randomly.

Pair Corralation between HE Equipment and Alta Equipment

Given the investment horizon of 90 days HE Equipment Services is expected to generate 3.26 times more return on investment than Alta Equipment. However, HE Equipment is 3.26 times more volatile than Alta Equipment Group. It trades about 0.12 of its potential returns per unit of risk. Alta Equipment Group is currently generating about -0.1 per unit of risk. If you would invest  4,926  in HE Equipment Services on December 27, 2024 and sell it today you would earn a total of  4,622  from holding HE Equipment Services or generate 93.83% return on investment over 90 days.

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

HE Equipment Services  vs.  Alta Equipment Group

HE Equipment Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alta Equipment Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alta Equipment Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with HE Equipment and Alta Equipment

The main advantage of trading using opposite HE Equipment and Alta Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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 HE Equipment Services 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.