Correlation Between SG Blocks and Northwest Pipe
Can any of the company-specific risk be diversified away by investing in both SG Blocks 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 SG Blocks and Northwest Pipe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SG Blocks and Northwest Pipe, you can compare the effects of market volatilities on SG Blocks 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 SG Blocks with a short position of Northwest Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of SG Blocks and Northwest Pipe.
Diversification Opportunities for SG Blocks and Northwest Pipe
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between SGBX and Northwest is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding SG Blocks and Northwest Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Pipe and SG Blocks 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 SG Blocks 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 SG Blocks i.e., SG Blocks and Northwest Pipe go up and down completely randomly.
Pair Corralation between SG Blocks and Northwest Pipe
Given the investment horizon of 90 days SG Blocks is expected to under-perform the Northwest Pipe. In addition to that, SG Blocks is 1.94 times more volatile than Northwest Pipe. It trades about -0.77 of its total potential returns per unit of risk. Northwest Pipe is currently generating about 0.35 per unit of volatility. If you would invest 4,522 in Northwest Pipe on August 30, 2024 and sell it today you would earn a total of 1,117 from holding Northwest Pipe or generate 24.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SG Blocks vs. Northwest Pipe
Performance |
| Timeline |
| SG Blocks |
| Northwest Pipe |
SG Blocks and Northwest Pipe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SG Blocks and Northwest Pipe
The main advantage of trading using opposite SG Blocks and Northwest Pipe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SG Blocks 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.| SG Blocks vs. Insteel Industries | SG Blocks vs. Carpenter Technology | SG Blocks vs. Haynes International | SG Blocks vs. Mueller Industries |
| Northwest Pipe vs. Carpenter Technology | Northwest Pipe vs. Haynes International | Northwest Pipe vs. Ryerson Holding Corp | Northwest Pipe vs. Allegheny Technologies Incorporated |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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