Correlation Between Stella Jones and Westport Fuel
Can any of the company-specific risk be diversified away by investing in both Stella Jones 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 Stella Jones and Westport Fuel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stella Jones and Westport Fuel Systems, you can compare the effects of market volatilities on Stella Jones 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 Stella Jones with a short position of Westport Fuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stella Jones and Westport Fuel.
Diversification Opportunities for Stella Jones and Westport Fuel
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stella and Westport is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Stella Jones 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 Stella Jones 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 Stella Jones 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 Stella Jones i.e., Stella Jones and Westport Fuel go up and down completely randomly.
Pair Corralation between Stella Jones and Westport Fuel
Assuming the 90 days horizon Stella Jones is expected to generate 0.55 times more return on investment than Westport Fuel. However, Stella Jones is 1.82 times less risky than Westport Fuel. It trades about 0.05 of its potential returns per unit of risk. Westport Fuel Systems is currently generating about -0.01 per unit of risk. If you would invest 5,247 in Stella Jones on August 26, 2024 and sell it today you would earn a total of 1,822 from holding Stella Jones or generate 34.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stella Jones vs. Westport Fuel Systems
Performance |
| Timeline |
| Stella Jones |
| Westport Fuel Systems |
Stella Jones and Westport Fuel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stella Jones and Westport Fuel
The main advantage of trading using opposite Stella Jones and Westport Fuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stella Jones 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.| Stella Jones vs. Richelieu Hardware | Stella Jones vs. CCL Industries | Stella Jones vs. Stantec | Stella Jones vs. Gildan Activewear |
| Westport Fuel vs. Martinrea International | Westport Fuel vs. Magna International | Westport Fuel vs. CCL Industries | Westport Fuel vs. Stella Jones |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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