Correlation Between PACCAR and Ferrovial

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

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

Diversification Opportunities for PACCAR and Ferrovial

0.87

Correlation Coefficient

PACCAR  Ferrovial

Very poor diversification

The 3 months correlation between PACCAR and Ferrovial is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Ferrovial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrovial 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 Ferrovial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrovial has no effect on the direction of PACCAR i.e., PACCAR and Ferrovial go up and down completely randomly.

Pair Corralation between PACCAR and Ferrovial

Given the investment horizon of 90 days PACCAR is expected to generate 1.52 times less return on investment than Ferrovial. But when comparing it to its historical volatility, PACCAR Inc is 1.3 times less risky than Ferrovial. It trades about 0.08 of its potential returns per unit of risk. Ferrovial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,518  in Ferrovial on September 13, 2024 and sell it today you would earn a total of  732.00  from holding Ferrovial or generate 29.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	29.09%
Values	Daily Returns

PACCAR Inc  vs.  Ferrovial

PACCAR Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Ferrovial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PACCAR and Ferrovial

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

The idea behind PACCAR Inc and Ferrovial 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.