Correlation Between Mach Natural and PACCAR

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

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

Diversification Opportunities for Mach Natural and PACCAR

0.55

Correlation Coefficient

Mach Natural  PACCAR

Very weak diversification

The 3 months correlation between Mach and PACCAR is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Mach Natural Resources and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and Mach Natural 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 Mach Natural Resources 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 Mach Natural i.e., Mach Natural and PACCAR go up and down completely randomly.

Pair Corralation between Mach Natural and PACCAR

Considering the 90-day investment horizon Mach Natural Resources is expected to generate 1.01 times more return on investment than PACCAR. However, Mach Natural is 1.01 times more volatile than PACCAR Inc. It trades about -0.03 of its potential returns per unit of risk. PACCAR Inc is currently generating about -0.04 per unit of risk. If you would invest  1,594  in Mach Natural Resources on December 27, 2024 and sell it today you would lose (67.00) from holding Mach Natural Resources or give up 4.2% of portfolio value over 90 days.

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

Mach Natural Resources  vs.  PACCAR Inc

Mach Natural Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mach Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Mach Natural is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

PACCAR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACCAR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PACCAR is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Mach Natural and PACCAR

The main advantage of trading using opposite Mach Natural and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mach Natural 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 Mach Natural Resources 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.