Correlation Between PACCAR and Mosaic

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

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

Diversification Opportunities for PACCAR and Mosaic

0.14

Correlation Coefficient

PACCAR  Mosaic

Average diversification

The 3 months correlation between PACCAR and Mosaic is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and The Mosaic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mosaic 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 Mosaic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mosaic has no effect on the direction of PACCAR i.e., PACCAR and Mosaic go up and down completely randomly.

Pair Corralation between PACCAR and Mosaic

Given the investment horizon of 90 days PACCAR is expected to generate 2.44 times less return on investment than Mosaic. But when comparing it to its historical volatility, PACCAR Inc is 1.72 times less risky than Mosaic. It trades about 0.02 of its potential returns per unit of risk. The Mosaic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,561  in The Mosaic on September 18, 2024 and sell it today you would earn a total of  23.00  from holding The Mosaic or generate 0.9% return on investment over 90 days.

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

PACCAR Inc  vs.  The Mosaic

PACCAR Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Mosaic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Mosaic are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mosaic is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PACCAR and Mosaic

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

The idea behind PACCAR Inc and The Mosaic 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.