Correlation Between Proto Labs and Northwest Pipe
Can any of the company-specific risk be diversified away by investing in both Proto Labs 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 Proto Labs and Northwest Pipe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Proto Labs and Northwest Pipe, you can compare the effects of market volatilities on Proto Labs 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 Proto Labs with a short position of Northwest Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proto Labs and Northwest Pipe.
Diversification Opportunities for Proto Labs and Northwest Pipe
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Proto and Northwest is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Proto Labs and Northwest Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Pipe and Proto Labs 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 Proto Labs 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 Proto Labs i.e., Proto Labs and Northwest Pipe go up and down completely randomly.
Pair Corralation between Proto Labs and Northwest Pipe
Given the investment horizon of 90 days Proto Labs is expected to generate 1.07 times more return on investment than Northwest Pipe. However, Proto Labs is 1.07 times more volatile than Northwest Pipe. It trades about 0.2 of its potential returns per unit of risk. Northwest Pipe is currently generating about -0.02 per unit of risk. If you would invest 3,925 in Proto Labs on November 5, 2024 and sell it today you would earn a total of 275.00 from holding Proto Labs or generate 7.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Proto Labs vs. Northwest Pipe
Performance |
| Timeline |
| Proto Labs |
| Northwest Pipe |
Proto Labs and Northwest Pipe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proto Labs and Northwest Pipe
The main advantage of trading using opposite Proto Labs and Northwest Pipe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proto Labs 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.| Proto Labs vs. Northwest Pipe | Proto Labs vs. Tredegar | Proto Labs vs. Insteel Industries | Proto Labs vs. Ryerson Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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