Correlation Between Willdan and Steel Connect

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

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

Diversification Opportunities for Willdan and Steel Connect

-0.29

Correlation Coefficient

Willdan  Steel Connect

Very good diversification

The 3 months correlation between Willdan and Steel is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Willdan Group and Steel Connect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Connect and Willdan 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 Willdan Group are associated (or correlated) with Steel Connect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Connect has no effect on the direction of Willdan i.e., Willdan and Steel Connect go up and down completely randomly.

Pair Corralation between Willdan and Steel Connect

Given the investment horizon of 90 days Willdan Group is expected to under-perform the Steel Connect. But the stock apears to be less risky and, when comparing its historical volatility, Willdan Group is 3.53 times less risky than Steel Connect. The stock trades about -0.21 of its potential returns per unit of risk. The Steel Connect is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,029  in Steel Connect on September 12, 2024 and sell it today you would earn a total of  198.00  from holding Steel Connect or generate 19.24% return on investment over 90 days.

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

Willdan Group  vs.  Steel Connect

Willdan Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Willdan Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Willdan displayed solid returns over the last few months and may actually be approaching a breakup point.

Steel Connect

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Connect are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Steel Connect may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Willdan and Steel Connect

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

The idea behind Willdan Group and Steel Connect 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .