Correlation Between PACCAR and Wabash National

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

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

Diversification Opportunities for PACCAR and Wabash National

0.76

Correlation Coefficient

PACCAR  Wabash National

Poor diversification

The 3 months correlation between PACCAR and Wabash is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National and PACCAR 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 PACCAR Inc are associated (or correlated) with Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of PACCAR i.e., PACCAR and Wabash National go up and down completely randomly.

Pair Corralation between PACCAR and Wabash National

Assuming the 90 days horizon PACCAR Inc is expected to generate 0.79 times more return on investment than Wabash National. However, PACCAR Inc is 1.27 times less risky than Wabash National. It trades about 0.0 of its potential returns per unit of risk. Wabash National is currently generating about -0.29 per unit of risk. If you would invest  10,420  in PACCAR Inc on October 15, 2024 and sell it today you would lose (18.00) from holding PACCAR Inc or give up 0.17% of portfolio value over 90 days.

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

PACCAR Inc  vs.  Wabash National

PACCAR Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PACCAR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Wabash National is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PACCAR and Wabash National

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

The idea behind PACCAR Inc and Wabash National 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.