Correlation Between CompoSecure and Northwest Pipe
Can any of the company-specific risk be diversified away by investing in both CompoSecure and Northwest Pipe 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 CompoSecure and Northwest Pipe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CompoSecure and Northwest Pipe, you can compare the effects of market volatilities on CompoSecure and Northwest Pipe 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 CompoSecure with a short position of Northwest Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of CompoSecure and Northwest Pipe.
Diversification Opportunities for CompoSecure and Northwest Pipe
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between CompoSecure and Northwest is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure and Northwest Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Pipe and CompoSecure 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 CompoSecure are associated (or correlated) with Northwest Pipe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Pipe has no effect on the direction of CompoSecure i.e., CompoSecure and Northwest Pipe go up and down completely randomly.
Pair Corralation between CompoSecure and Northwest Pipe
Given the investment horizon of 90 days CompoSecure is expected to generate 1.36 times more return on investment than Northwest Pipe. However, CompoSecure is 1.36 times more volatile than Northwest Pipe. It trades about 0.08 of its potential returns per unit of risk. Northwest Pipe is currently generating about 0.03 per unit of risk. If you would invest 650.00 in CompoSecure on November 2, 2024 and sell it today you would earn a total of 978.00 from holding CompoSecure or generate 150.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CompoSecure vs. Northwest Pipe
Performance |
| Timeline |
| CompoSecure |
| Northwest Pipe |
CompoSecure and Northwest Pipe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CompoSecure and Northwest Pipe
The main advantage of trading using opposite CompoSecure and Northwest Pipe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompoSecure position performs unexpectedly, Northwest Pipe 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 Northwest Pipe will offset losses from the drop in Northwest Pipe's long position.| CompoSecure vs. Northwest Pipe | CompoSecure vs. Insteel Industries | CompoSecure vs. Carpenter Technology | CompoSecure vs. ESAB Corp |
| Northwest Pipe vs. Insteel Industries | Northwest Pipe vs. Carpenter Technology | Northwest Pipe vs. ESAB Corp | Northwest Pipe vs. Gulf Island Fabrication |
Check out your portfolio center.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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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