Correlation Between Quaker Chemical and PACCAR

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

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

Diversification Opportunities for Quaker Chemical and PACCAR

0.34

Correlation Coefficient

Quaker Chemical  PACCAR

Weak diversification

The 3 months correlation between Quaker and PACCAR is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and Quaker Chemical 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 Quaker Chemical are associated (or correlated) with PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Quaker Chemical i.e., Quaker Chemical and PACCAR go up and down completely randomly.

Pair Corralation between Quaker Chemical and PACCAR

Assuming the 90 days horizon Quaker Chemical is expected to under-perform the PACCAR. In addition to that, Quaker Chemical is 1.06 times more volatile than PACCAR Inc. It trades about -0.43 of its total potential returns per unit of risk. PACCAR Inc is currently generating about -0.22 per unit of volatility. If you would invest  10,721  in PACCAR Inc on September 27, 2024 and sell it today you would lose (681.00) from holding PACCAR Inc or give up 6.35% of portfolio value over 90 days.

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

Quaker Chemical  vs.  PACCAR Inc

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PACCAR Inc

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quaker Chemical and PACCAR

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

The idea behind Quaker Chemical and PACCAR Inc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.