Correlation Between Timken and Weyco

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

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

Diversification Opportunities for Timken and Weyco

-0.71

Correlation Coefficient

Timken  Weyco

Pay attention - limited upside

The 3 months correlation between Timken and Weyco is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Weyco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyco Group and Timken 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 Timken Company are associated (or correlated) with Weyco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyco Group has no effect on the direction of Timken i.e., Timken and Weyco go up and down completely randomly.

Pair Corralation between Timken and Weyco

Considering the 90-day investment horizon Timken is expected to generate 5.68 times less return on investment than Weyco. But when comparing it to its historical volatility, Timken Company is 1.14 times less risky than Weyco. It trades about 0.01 of its potential returns per unit of risk. Weyco Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,973  in Weyco Group on September 20, 2024 and sell it today you would earn a total of  1,644  from holding Weyco Group or generate 83.32% return on investment over 90 days.

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

Timken Company  vs.  Weyco Group

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Weyco Group

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weyco Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Weyco unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Timken and Weyco

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

The idea behind Timken Company and Weyco 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.

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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.