Correlation Between Wabash National and Austin Engineering

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

By analyzing existing cross correlation between Wabash National and Austin Engineering Limited, you can compare the effects of market volatilities on Wabash National and Austin Engineering 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 Wabash National with a short position of Austin Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wabash National and Austin Engineering.

Diversification Opportunities for Wabash National and Austin Engineering

-0.17

Correlation Coefficient

Wabash National  Austin Engineering

Good diversification

The 3 months correlation between Wabash and Austin is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and Austin Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austin Engineering and Wabash National 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 Wabash National are associated (or correlated) with Austin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austin Engineering has no effect on the direction of Wabash National i.e., Wabash National and Austin Engineering go up and down completely randomly.

Pair Corralation between Wabash National and Austin Engineering

Considering the 90-day investment horizon Wabash National is expected to under-perform the Austin Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Wabash National is 2.0 times less risky than Austin Engineering. The stock trades about -0.01 of its potential returns per unit of risk. The Austin Engineering Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Austin Engineering Limited on September 22, 2024 and sell it today you would earn a total of  10.00  from holding Austin Engineering Limited or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Wabash National  vs.  Austin Engineering Limited

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Austin Engineering

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Austin Engineering Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Austin Engineering reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wabash National and Austin Engineering

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

The idea behind Wabash National and Austin Engineering Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.