Correlation Between WD 40 and Loop Industries

Can any of the company-specific risk be diversified away by investing in both WD 40 and Loop 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 WD 40 and Loop Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WD 40 Company and Loop Industries, you can compare the effects of market volatilities on WD 40 and Loop 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 WD 40 with a short position of Loop Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of WD 40 and Loop Industries.

Diversification Opportunities for WD 40 and Loop Industries

0.14

Correlation Coefficient

WD 40  Loop Industries

Average diversification

The 3 months correlation between WDFC and Loop is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding WD 40 Company and Loop Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loop Industries and WD 40 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 WD 40 Company are associated (or correlated) with Loop Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loop Industries has no effect on the direction of WD 40 i.e., WD 40 and Loop Industries go up and down completely randomly.

Pair Corralation between WD 40 and Loop Industries

Given the investment horizon of 90 days WD 40 Company is expected to under-perform the Loop Industries. But the stock apears to be less risky and, when comparing its historical volatility, WD 40 Company is 3.27 times less risky than Loop Industries. The stock trades about -0.03 of its potential returns per unit of risk. The Loop Industries is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  126.00  in Loop Industries on December 27, 2024 and sell it today you would lose (6.00) from holding Loop Industries or give up 4.76% of portfolio value over 90 days.

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

WD 40 Company  vs.  Loop Industries

WD 40 Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days WD 40 Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WD 40 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Loop Industries

Risk-Adjusted Performance

Insignificant

Over the last 90 days Loop Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Loop Industries is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with WD 40 and Loop Industries

The main advantage of trading using opposite WD 40 and Loop Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WD 40 position performs unexpectedly, Loop 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 Loop Industries will offset losses from the drop in Loop Industries' long position.

The idea behind WD 40 Company and Loop 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.