Correlation Between Hyster Yale and PACCAR

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

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

Diversification Opportunities for Hyster Yale and PACCAR

-0.54

Correlation Coefficient

Hyster Yale  PACCAR

Excellent diversification

The 3 months correlation between Hyster and PACCAR is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hyster Yale Materials Handling and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and Hyster Yale 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 Hyster Yale Materials Handling 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 Hyster Yale i.e., Hyster Yale and PACCAR go up and down completely randomly.

Pair Corralation between Hyster Yale and PACCAR

Assuming the 90 days trading horizon Hyster Yale Materials Handling is expected to under-perform the PACCAR. In addition to that, Hyster Yale is 1.35 times more volatile than PACCAR Inc. It trades about -0.29 of its total potential returns per unit of risk. PACCAR Inc is currently generating about -0.22 per unit of volatility. If you would invest  10,721  in PACCAR Inc on September 27, 2024 and sell it today you would lose (681.00) from holding PACCAR Inc or give up 6.35% of portfolio value over 90 days.

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

Hyster Yale Materials Handling  vs.  PACCAR Inc

Hyster Yale Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyster Yale Materials Handling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PACCAR Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyster Yale and PACCAR

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