Correlation Between Northwest Pipe and ADF
Can any of the company-specific risk be diversified away by investing in both Northwest Pipe and ADF 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 Northwest Pipe and ADF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northwest Pipe and ADF Group, you can compare the effects of market volatilities on Northwest Pipe and ADF 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 Northwest Pipe with a short position of ADF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northwest Pipe and ADF.
Diversification Opportunities for Northwest Pipe and ADF
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Northwest and ADF is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Pipe and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group and Northwest Pipe 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 Northwest Pipe are associated (or correlated) with ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Northwest Pipe i.e., Northwest Pipe and ADF go up and down completely randomly.
Pair Corralation between Northwest Pipe and ADF
Given the investment horizon of 90 days Northwest Pipe is expected to generate 0.48 times more return on investment than ADF. However, Northwest Pipe is 2.07 times less risky than ADF. It trades about 0.15 of its potential returns per unit of risk. ADF Group is currently generating about 0.05 per unit of risk. If you would invest 2,750 in Northwest Pipe on September 4, 2024 and sell it today you would earn a total of 2,867 from holding Northwest Pipe or generate 104.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.98% |
| Values | Daily Returns |
Northwest Pipe vs. ADF Group
Performance |
| Timeline |
| Northwest Pipe |
| ADF Group |
Northwest Pipe and ADF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northwest Pipe and ADF
The main advantage of trading using opposite Northwest Pipe and ADF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northwest Pipe position performs unexpectedly, ADF 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 ADF will offset losses from the drop in ADF's long position.| 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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