Correlation Between McGrath RentCorp and Aldel Financial

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

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

Diversification Opportunities for McGrath RentCorp and Aldel Financial

0.36

Correlation Coefficient

McGrath RentCorp  Aldel Financial

Weak diversification

The 3 months correlation between McGrath and Aldel is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding McGrath RentCorp and Aldel Financial II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldel Financial II and McGrath RentCorp 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 McGrath RentCorp are associated (or correlated) with Aldel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldel Financial II has no effect on the direction of McGrath RentCorp i.e., McGrath RentCorp and Aldel Financial go up and down completely randomly.

Pair Corralation between McGrath RentCorp and Aldel Financial

Given the investment horizon of 90 days McGrath RentCorp is expected to generate 16.62 times more return on investment than Aldel Financial. However, McGrath RentCorp is 16.62 times more volatile than Aldel Financial II. It trades about 0.07 of its potential returns per unit of risk. Aldel Financial II is currently generating about 0.29 per unit of risk. If you would invest  10,859  in McGrath RentCorp on October 26, 2024 and sell it today you would earn a total of  1,440  from holding McGrath RentCorp or generate 13.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	20.97%
Values	Daily Returns

McGrath RentCorp  vs.  Aldel Financial II

McGrath RentCorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McGrath RentCorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, McGrath RentCorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Aldel Financial II

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with McGrath RentCorp and Aldel Financial

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

The idea behind McGrath RentCorp and Aldel Financial II 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.