Correlation Between VirTra and Woodward
Can any of the company-specific risk be diversified away by investing in both VirTra 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 VirTra and Woodward into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VirTra Inc and Woodward, you can compare the effects of market volatilities on VirTra 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 VirTra with a short position of Woodward. Check out your portfolio center. Please also check ongoing floating volatility patterns of VirTra and Woodward.
Diversification Opportunities for VirTra and Woodward
Poor diversification
The 3 months correlation between VirTra and Woodward is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding VirTra Inc and Woodward in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodward and VirTra 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 VirTra Inc 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 VirTra i.e., VirTra and Woodward go up and down completely randomly.
Pair Corralation between VirTra and Woodward
Given the investment horizon of 90 days VirTra Inc is expected to generate 2.94 times more return on investment than Woodward. However, VirTra is 2.94 times more volatile than Woodward. It trades about 0.06 of its potential returns per unit of risk. Woodward is currently generating about 0.08 per unit of risk. If you would invest 500.00 in VirTra Inc on September 1, 2024 and sell it today you would earn a total of 283.00 from holding VirTra Inc or generate 56.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VirTra Inc vs. Woodward
Performance |
| Timeline |
| VirTra Inc |
| Woodward |
VirTra and Woodward Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VirTra and Woodward
The main advantage of trading using opposite VirTra and Woodward positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VirTra 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.| VirTra vs. Innovative Solutions and | VirTra vs. Park Electrochemical | VirTra vs. Ducommun Incorporated | VirTra 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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