Correlation Between PACCAR and Ioneer

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

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

Diversification Opportunities for PACCAR and Ioneer

0.42

Correlation Coefficient

PACCAR  Ioneer

Very weak diversification

The 3 months correlation between PACCAR and Ioneer is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and ioneer Ltd American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ioneer American 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 Ioneer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ioneer American has no effect on the direction of PACCAR i.e., PACCAR and Ioneer go up and down completely randomly.

Pair Corralation between PACCAR and Ioneer

Given the investment horizon of 90 days PACCAR Inc is expected to under-perform the Ioneer. But the stock apears to be less risky and, when comparing its historical volatility, PACCAR Inc is 2.79 times less risky than Ioneer. The stock trades about -0.04 of its potential returns per unit of risk. The ioneer Ltd American is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  385.00  in ioneer Ltd American on December 20, 2024 and sell it today you would earn a total of  48.00  from holding ioneer Ltd American or generate 12.47% return on investment over 90 days.

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

PACCAR Inc  vs.  ioneer Ltd American

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.

ioneer American

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ioneer Ltd American are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Ioneer reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PACCAR and Ioneer

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

The idea behind PACCAR Inc and ioneer Ltd American 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.