Correlation Between Northwest Pipe and Proto Labs
Can any of the company-specific risk be diversified away by investing in both Northwest Pipe and Proto Labs 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 Proto Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northwest Pipe and Proto Labs, you can compare the effects of market volatilities on Northwest Pipe and Proto Labs 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 Proto Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northwest Pipe and Proto Labs.
Diversification Opportunities for Northwest Pipe and Proto Labs
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northwest and Proto is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Pipe and Proto Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proto Labs 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 Proto Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proto Labs has no effect on the direction of Northwest Pipe i.e., Northwest Pipe and Proto Labs go up and down completely randomly.
Pair Corralation between Northwest Pipe and Proto Labs
Given the investment horizon of 90 days Northwest Pipe is expected to generate 1.99 times less return on investment than Proto Labs. But when comparing it to its historical volatility, Northwest Pipe is 3.03 times less risky than Proto Labs. It trades about 0.36 of its potential returns per unit of risk. Proto Labs is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,675 in Proto Labs on August 24, 2024 and sell it today you would earn a total of 1,299 from holding Proto Labs or generate 48.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northwest Pipe vs. Proto Labs
Performance |
| Timeline |
| Northwest Pipe |
| Proto Labs |
Northwest Pipe and Proto Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northwest Pipe and Proto Labs
The main advantage of trading using opposite Northwest Pipe and Proto Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northwest Pipe position performs unexpectedly, Proto Labs 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 Proto Labs will offset losses from the drop in Proto Labs' long position.| Northwest Pipe vs. Insteel Industries | Northwest Pipe vs. Carpenter Technology | Northwest Pipe vs. ESAB Corp | Northwest Pipe vs. Gulf Island Fabrication |
| Proto Labs vs. Northwest Pipe | Proto Labs vs. Tredegar | Proto Labs vs. Insteel Industries | Proto Labs vs. Ryerson Holding Corp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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