Correlation Between Dixie and Westport Fuel
Can any of the company-specific risk be diversified away by investing in both Dixie and Westport Fuel 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 Dixie and Westport Fuel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Dixie Group and Westport Fuel Systems, you can compare the effects of market volatilities on Dixie and Westport Fuel 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 Dixie with a short position of Westport Fuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dixie and Westport Fuel.
Diversification Opportunities for Dixie and Westport Fuel
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dixie and Westport is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Dixie Group and Westport Fuel Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westport Fuel Systems and Dixie 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 The Dixie Group are associated (or correlated) with Westport Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westport Fuel Systems has no effect on the direction of Dixie i.e., Dixie and Westport Fuel go up and down completely randomly.
Pair Corralation between Dixie and Westport Fuel
Given the investment horizon of 90 days The Dixie Group is expected to generate 1.75 times more return on investment than Westport Fuel. However, Dixie is 1.75 times more volatile than Westport Fuel Systems. It trades about 0.01 of its potential returns per unit of risk. Westport Fuel Systems is currently generating about -0.02 per unit of risk. If you would invest 122.00 in The Dixie Group on August 27, 2024 and sell it today you would lose (43.00) from holding The Dixie Group or give up 35.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.35% |
| Values | Daily Returns |
The Dixie Group vs. Westport Fuel Systems
Performance |
| Timeline |
| Dixie Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Westport Fuel Systems |
Dixie and Westport Fuel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dixie and Westport Fuel
The main advantage of trading using opposite Dixie and Westport Fuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dixie position performs unexpectedly, Westport Fuel 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 Westport Fuel will offset losses from the drop in Westport Fuel's long position.The idea behind The Dixie Group and Westport Fuel Systems 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.| Westport Fuel vs. Foresight Autonomous Holdings | Westport Fuel vs. Hyliion Holdings Corp | Westport Fuel vs. American Axle Manufacturing | Westport Fuel vs. Gentex |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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