Correlation Between Northwest Pipe and SG Blocks

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

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

Diversification Opportunities for Northwest Pipe and SG Blocks

-0.82

Correlation Coefficient

Northwest Pipe  SG Blocks

Pay attention - limited upside

The 3 months correlation between Northwest and SGBX is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Pipe and SG Blocks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SG Blocks and Northwest Pipe 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 Northwest Pipe are associated (or correlated) with SG Blocks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SG Blocks has no effect on the direction of Northwest Pipe i.e., Northwest Pipe and SG Blocks go up and down completely randomly.

Pair Corralation between Northwest Pipe and SG Blocks

Given the investment horizon of 90 days Northwest Pipe is expected to generate 0.19 times more return on investment than SG Blocks. However, Northwest Pipe is 5.19 times less risky than SG Blocks. It trades about 0.13 of its potential returns per unit of risk. SG Blocks is currently generating about -0.07 per unit of risk. If you would invest  2,600  in Northwest Pipe on September 23, 2024 and sell it today you would earn a total of  2,327  from holding Northwest Pipe or generate 89.5% return on investment over 90 days.

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

Northwest Pipe  vs.  SG Blocks

Northwest Pipe

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Pipe are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Northwest Pipe showed solid returns over the last few months and may actually be approaching a breakup point.

SG Blocks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SG Blocks 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 drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Northwest Pipe and SG Blocks

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

The idea behind Northwest Pipe and SG Blocks 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 Global Correlations module to find global opportunities by holding instruments from different markets.