Correlation Between Woodward and Hexcel
Can any of the company-specific risk be diversified away by investing in both Woodward and Hexcel 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 Woodward and Hexcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woodward and Hexcel, you can compare the effects of market volatilities on Woodward and Hexcel 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 Woodward with a short position of Hexcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woodward and Hexcel.
Diversification Opportunities for Woodward and Hexcel
Average diversification
The 3 months correlation between Woodward and Hexcel is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Woodward and Hexcel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel and Woodward 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 Woodward are associated (or correlated) with Hexcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexcel has no effect on the direction of Woodward i.e., Woodward and Hexcel go up and down completely randomly.
Pair Corralation between Woodward and Hexcel
Considering the 90-day investment horizon Woodward is expected to generate 1.08 times more return on investment than Hexcel. However, Woodward is 1.08 times more volatile than Hexcel. It trades about 0.07 of its potential returns per unit of risk. Hexcel is currently generating about -0.05 per unit of risk. If you would invest 14,087 in Woodward on August 27, 2024 and sell it today you would earn a total of 3,518 from holding Woodward or generate 24.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woodward vs. Hexcel
Performance |
| Timeline |
| Woodward |
| Hexcel |
Woodward and Hexcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woodward and Hexcel
The main advantage of trading using opposite Woodward and Hexcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodward position performs unexpectedly, Hexcel 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 Hexcel will offset losses from the drop in Hexcel's long position.| 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 Stocks Directory module to find actively traded stocks across global markets.
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