Correlation Between Kubota and Alamo

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

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

Diversification Opportunities for Kubota and Alamo

-0.69

Correlation Coefficient

Kubota  Alamo

Excellent diversification

The 3 months correlation between Kubota and Alamo is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kubota and Alamo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Group and Kubota 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 Kubota are associated (or correlated) with Alamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Group has no effect on the direction of Kubota i.e., Kubota and Alamo go up and down completely randomly.

Pair Corralation between Kubota and Alamo

Assuming the 90 days horizon Kubota is expected to under-perform the Alamo. In addition to that, Kubota is 1.04 times more volatile than Alamo Group. It trades about -0.16 of its total potential returns per unit of risk. Alamo Group is currently generating about 0.06 per unit of volatility. If you would invest  19,349  in Alamo Group on September 18, 2024 and sell it today you would earn a total of  302.00  from holding Alamo Group or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Kubota  vs.  Alamo Group

Kubota

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alamo Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alamo Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Alamo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kubota and Alamo

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

The idea behind Kubota and Alamo 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .