Correlation Between VSE and Woodward
Can any of the company-specific risk be diversified away by investing in both VSE and Woodward 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 VSE and Woodward into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VSE Corporation and Woodward, you can compare the effects of market volatilities on VSE and Woodward 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 VSE with a short position of Woodward. Check out your portfolio center. Please also check ongoing floating volatility patterns of VSE and Woodward.
Diversification Opportunities for VSE and Woodward
Very weak diversification
The 3 months correlation between VSE and Woodward is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding VSE Corp. and Woodward in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodward and VSE 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 VSE Corporation are associated (or correlated) with Woodward. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodward has no effect on the direction of VSE i.e., VSE and Woodward go up and down completely randomly.
Pair Corralation between VSE and Woodward
Given the investment horizon of 90 days VSE Corporation is expected to generate 2.19 times more return on investment than Woodward. However, VSE is 2.19 times more volatile than Woodward. It trades about 0.12 of its potential returns per unit of risk. Woodward is currently generating about 0.07 per unit of risk. If you would invest 9,145 in VSE Corporation on August 24, 2024 and sell it today you would earn a total of 2,281 from holding VSE Corporation or generate 24.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VSE Corp. vs. Woodward
Performance |
| Timeline |
| VSE Corporation |
| Woodward |
VSE and Woodward Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VSE and Woodward
The main advantage of trading using opposite VSE and Woodward positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VSE position performs unexpectedly, Woodward 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 Woodward will offset losses from the drop in Woodward's long position.| VSE vs. Park Electrochemical | VSE vs. Innovative Solutions and | VSE vs. Curtiss Wright | VSE vs. National Presto Industries |
| Woodward vs. Hexcel | Woodward vs. Ducommun Incorporated | Woodward vs. Mercury Systems | Woodward vs. AAR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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