Correlation Between Exponent and Willdan

Can any of the company-specific risk be diversified away by investing in both Exponent and Willdan 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 Exponent and Willdan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Exponent and Willdan Group, you can compare the effects of market volatilities on Exponent and Willdan 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 Exponent with a short position of Willdan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exponent and Willdan.

Diversification Opportunities for Exponent and Willdan

0.1

Correlation Coefficient

Exponent  Willdan

Average diversification

The 3 months correlation between Exponent and Willdan is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Exponent and Willdan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willdan Group and Exponent 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 Exponent are associated (or correlated) with Willdan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willdan Group has no effect on the direction of Exponent i.e., Exponent and Willdan go up and down completely randomly.

Pair Corralation between Exponent and Willdan

Given the investment horizon of 90 days Exponent is expected to under-perform the Willdan. But the stock apears to be less risky and, when comparing its historical volatility, Exponent is 3.39 times less risky than Willdan. The stock trades about -0.15 of its potential returns per unit of risk. The Willdan Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,847  in Willdan Group on December 22, 2024 and sell it today you would earn a total of  349.00  from holding Willdan Group or generate 9.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Exponent  vs.  Willdan Group

Exponent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Willdan Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Willdan Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Willdan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exponent and Willdan

The main advantage of trading using opposite Exponent and Willdan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exponent position performs unexpectedly, Willdan 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 Willdan will offset losses from the drop in Willdan's long position.

The idea behind Exponent and Willdan Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.