Correlation Between Wabash National and Terex

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

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

Diversification Opportunities for Wabash National and Terex

0.73

Correlation Coefficient

Wabash National  Terex

Poor diversification

The 3 months correlation between Wabash and Terex is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and Terex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terex 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 Terex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terex has no effect on the direction of Wabash National i.e., Wabash National and Terex go up and down completely randomly.

Pair Corralation between Wabash National and Terex

Considering the 90-day investment horizon Wabash National is expected to under-perform the Terex. In addition to that, Wabash National is 1.12 times more volatile than Terex. It trades about -0.39 of its total potential returns per unit of risk. Terex is currently generating about -0.2 per unit of volatility. If you would invest  5,479  in Terex on November 28, 2024 and sell it today you would lose (1,288) from holding Terex or give up 23.51% of portfolio value over 90 days.

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

Wabash National  vs.  Terex

Wabash National

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Terex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Terex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Wabash National and Terex

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

The idea behind Wabash National and Terex 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.