Correlation Between Mueller Industries and Worthington Industries

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

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

Diversification Opportunities for Mueller Industries and Worthington Industries

-0.14

Correlation Coefficient

Mueller Industries  Worthington Industries

Good diversification

The 3 months correlation between Mueller and Worthington is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Industries and Worthington Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Industries and Mueller Industries 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 Mueller Industries are associated (or correlated) with Worthington Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Industries has no effect on the direction of Mueller Industries i.e., Mueller Industries and Worthington Industries go up and down completely randomly.

Pair Corralation between Mueller Industries and Worthington Industries

Considering the 90-day investment horizon Mueller Industries is expected to under-perform the Worthington Industries. But the stock apears to be less risky and, when comparing its historical volatility, Mueller Industries is 2.09 times less risky than Worthington Industries. The stock trades about -0.03 of its potential returns per unit of risk. The Worthington Industries is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,989  in Worthington Industries on December 30, 2024 and sell it today you would earn a total of  1,059  from holding Worthington Industries or generate 26.55% return on investment over 90 days.

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

Mueller Industries  vs.  Worthington Industries

Mueller Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mueller Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Mueller Industries is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Worthington Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Worthington Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Worthington Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mueller Industries and Worthington Industries

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

The idea behind Mueller Industries and Worthington Industries 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.