Correlation Between PACCAR and Hyster Yale

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

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

Diversification Opportunities for PACCAR and Hyster Yale

0.7

Correlation Coefficient

PACCAR  Hyster Yale

Poor diversification

The 3 months correlation between PACCAR and Hyster is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Hyster Yale Materials Handling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyster Yale Materials 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 Hyster Yale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyster Yale Materials has no effect on the direction of PACCAR i.e., PACCAR and Hyster Yale go up and down completely randomly.

Pair Corralation between PACCAR and Hyster Yale

Given the investment horizon of 90 days PACCAR Inc is expected to generate 0.72 times more return on investment than Hyster Yale. However, PACCAR Inc is 1.38 times less risky than Hyster Yale. It trades about -0.04 of its potential returns per unit of risk. Hyster Yale Materials Handling is currently generating about -0.07 per unit of risk. If you would invest  10,329  in PACCAR Inc on December 28, 2024 and sell it today you would lose (510.00) from holding PACCAR Inc or give up 4.94% 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.  Hyster Yale Materials Handling

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.

Hyster Yale Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hyster Yale Materials Handling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PACCAR and Hyster Yale

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

The idea behind PACCAR Inc and Hyster Yale Materials Handling 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 Transaction History module to view history of all your transactions and understand their impact on performance.