Correlation Between Hexcel and Woodward

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

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

Diversification Opportunities for Hexcel and Woodward

0.28

Correlation Coefficient

Hexcel  Woodward

Modest diversification

The 3 months correlation between Hexcel and Woodward is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and Woodward in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodward and Hexcel 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 Hexcel 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 Hexcel i.e., Hexcel and Woodward go up and down completely randomly.

Pair Corralation between Hexcel and Woodward

Considering the 90-day investment horizon Hexcel is expected to under-perform the Woodward. In addition to that, Hexcel is 1.07 times more volatile than Woodward. It trades about -0.08 of its total potential returns per unit of risk. Woodward is currently generating about 0.09 per unit of volatility. If you would invest  16,788  in Woodward on December 28, 2024 and sell it today you would earn a total of  1,541  from holding Woodward or generate 9.18% return on investment over 90 days.

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

Hexcel  vs.  Woodward

Hexcel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hexcel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Woodward

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Woodward are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Woodward may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hexcel and Woodward

The main advantage of trading using opposite Hexcel and Woodward positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hexcel 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.

The idea behind Hexcel and Woodward 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 Commodity Directory module to find actively traded commodities issued by global exchanges.