Correlation Between PACCAR and Astec Industries

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

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

Diversification Opportunities for PACCAR and Astec Industries

-0.38

Correlation Coefficient

PACCAR  Astec Industries

Very good diversification

The 3 months correlation between PACCAR and Astec is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries 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 Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of PACCAR i.e., PACCAR and Astec Industries go up and down completely randomly.

Pair Corralation between PACCAR and Astec Industries

Given the investment horizon of 90 days PACCAR Inc is expected to under-perform the Astec Industries. But the stock apears to be less risky and, when comparing its historical volatility, PACCAR Inc is 1.59 times less risky than Astec Industries. The stock trades about -0.04 of its potential returns per unit of risk. The Astec Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,299  in Astec Industries on December 29, 2024 and sell it today you would earn a total of  204.00  from holding Astec Industries or generate 6.18% return on investment over 90 days.

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

PACCAR Inc  vs.  Astec Industries

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.

Astec Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Astec Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Astec Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PACCAR and Astec Industries

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

The idea behind PACCAR Inc and Astec Industries 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 Anywhere module to track or share privately all of your investments from the convenience of any device.