Correlation Between Mayville Engineering and Northwest Pipe

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

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

Diversification Opportunities for Mayville Engineering and Northwest Pipe

0.86

Correlation Coefficient

Mayville Engineering  Northwest Pipe

Very poor diversification

The 3 months correlation between Mayville and Northwest is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Mayville Engineering Co and Northwest Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Pipe and Mayville Engineering 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 Mayville Engineering Co are associated (or correlated) with Northwest Pipe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Pipe has no effect on the direction of Mayville Engineering i.e., Mayville Engineering and Northwest Pipe go up and down completely randomly.

Pair Corralation between Mayville Engineering and Northwest Pipe

Considering the 90-day investment horizon Mayville Engineering Co is expected to generate 0.82 times more return on investment than Northwest Pipe. However, Mayville Engineering Co is 1.23 times less risky than Northwest Pipe. It trades about -0.11 of its potential returns per unit of risk. Northwest Pipe is currently generating about -0.09 per unit of risk. If you would invest  1,566  in Mayville Engineering Co on December 30, 2024 and sell it today you would lose (213.00) from holding Mayville Engineering Co or give up 13.6% of portfolio value over 90 days.

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

Mayville Engineering Co  vs.  Northwest Pipe

Mayville Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mayville Engineering Co 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 technical and 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.

Northwest Pipe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northwest Pipe 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 basic 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.

Pair Trading with Mayville Engineering and Northwest Pipe

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

The idea behind Mayville Engineering Co and Northwest Pipe 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.