Correlation Between NYSE Composite and Willdan

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

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

Diversification Opportunities for NYSE Composite and Willdan

-0.46

Correlation Coefficient

NYSE Composite  Willdan

Very good diversification

The 3 months correlation between NYSE and Willdan is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Willdan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willdan Group and NYSE Composite 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 NYSE Composite are associated (or correlated) with Willdan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willdan Group has no effect on the direction of NYSE Composite i.e., NYSE Composite and Willdan go up and down completely randomly.

Pair Corralation between NYSE Composite and Willdan

Assuming the 90 days trading horizon NYSE Composite is expected to generate 5.67 times less return on investment than Willdan. But when comparing it to its historical volatility, NYSE Composite is 5.34 times less risky than Willdan. It trades about 0.05 of its potential returns per unit of risk. Willdan Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,877  in Willdan Group on December 20, 2024 and sell it today you would earn a total of  406.00  from holding Willdan Group or generate 10.47% return on investment over 90 days.

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

NYSE Composite  vs.  Willdan Group

Pair Trading with NYSE Composite and Willdan

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

The idea behind NYSE Composite and Willdan Group 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.