Correlation Between NI Holdings and PACCAR

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

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

Diversification Opportunities for NI Holdings and PACCAR

0.66

Correlation Coefficient

NI Holdings  PACCAR

Poor diversification

The 3 months correlation between NODK and PACCAR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and NI Holdings 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 NI Holdings 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 NI Holdings i.e., NI Holdings and PACCAR go up and down completely randomly.

Pair Corralation between NI Holdings and PACCAR

Given the investment horizon of 90 days NI Holdings is expected to under-perform the PACCAR. In addition to that, NI Holdings is 1.1 times more volatile than PACCAR Inc. It trades about -0.36 of its total potential returns per unit of risk. PACCAR Inc is currently generating about -0.16 per unit of volatility. If you would invest  11,163  in PACCAR Inc on October 9, 2024 and sell it today you would lose (439.00) from holding PACCAR Inc or give up 3.93% of portfolio value over 90 days.

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

NI Holdings  vs.  PACCAR Inc

NI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

PACCAR Inc

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PACCAR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NI Holdings and PACCAR

The main advantage of trading using opposite NI Holdings and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings 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 NI Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.