Correlation Between Comfort Systems and Willdan

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

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

Diversification Opportunities for Comfort Systems and Willdan

-0.03

Correlation Coefficient

Comfort Systems  Willdan

Good diversification

The 3 months correlation between Comfort and Willdan is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Comfort Systems USA and Willdan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willdan Group and Comfort Systems 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 Comfort Systems USA 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 Comfort Systems i.e., Comfort Systems and Willdan go up and down completely randomly.

Pair Corralation between Comfort Systems and Willdan

Considering the 90-day investment horizon Comfort Systems USA is expected to under-perform the Willdan. In addition to that, Comfort Systems is 1.13 times more volatile than Willdan Group. It trades about -0.07 of its total potential returns per unit of risk. Willdan Group is currently generating about 0.04 per unit of volatility. If you would invest  3,836  in Willdan Group on December 28, 2024 and sell it today you would earn a total of  261.00  from holding Willdan Group or generate 6.8% return on investment over 90 days.

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

Comfort Systems USA  vs.  Willdan Group

Comfort Systems USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Comfort Systems USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company 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 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Willdan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Comfort Systems and Willdan

The main advantage of trading using opposite Comfort Systems and Willdan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comfort Systems 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 Comfort Systems USA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.