Correlation Between Great Lakes and Arts Way

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

By analyzing existing cross correlation between Great Lakes Dredge and Arts Way Manufacturing Co, you can compare the effects of market volatilities on Great Lakes and Arts Way 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 Great Lakes with a short position of Arts Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Lakes and Arts Way.

Diversification Opportunities for Great Lakes and Arts Way

0.29

Correlation Coefficient

Great Lakes  Arts Way

Modest diversification

The 3 months correlation between Great and Arts is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Dredge and Arts Way Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arts Way Manufacturing and Great Lakes 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 Great Lakes Dredge are associated (or correlated) with Arts Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arts Way Manufacturing has no effect on the direction of Great Lakes i.e., Great Lakes and Arts Way go up and down completely randomly.

Pair Corralation between Great Lakes and Arts Way

Given the investment horizon of 90 days Great Lakes Dredge is expected to under-perform the Arts Way. But the stock apears to be less risky and, when comparing its historical volatility, Great Lakes Dredge is 2.34 times less risky than Arts Way. The stock trades about -0.09 of its potential returns per unit of risk. The Arts Way Manufacturing Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  244.00  in Arts Way Manufacturing Co on December 27, 2024 and sell it today you would lose (78.00) from holding Arts Way Manufacturing Co or give up 31.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Great Lakes Dredge  vs.  Arts Way Manufacturing Co

Great Lakes Dredge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great Lakes Dredge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Arts Way Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arts Way Manufacturing Co 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 basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Great Lakes and Arts Way

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

The idea behind Great Lakes Dredge and Arts Way Manufacturing Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.