Correlation Between Wabash National and RALPH

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

By analyzing existing cross correlation between Wabash National and RALPH LAUREN P, you can compare the effects of market volatilities on Wabash National and RALPH 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 Wabash National with a short position of RALPH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wabash National and RALPH.

Diversification Opportunities for Wabash National and RALPH

-0.31

Correlation Coefficient

Wabash National  RALPH

Very good diversification

The 3 months correlation between Wabash and RALPH is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and RALPH LAUREN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RALPH LAUREN P and Wabash National 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 Wabash National are associated (or correlated) with RALPH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RALPH LAUREN P has no effect on the direction of Wabash National i.e., Wabash National and RALPH go up and down completely randomly.

Pair Corralation between Wabash National and RALPH

Considering the 90-day investment horizon Wabash National is expected to generate 6.93 times more return on investment than RALPH. However, Wabash National is 6.93 times more volatile than RALPH LAUREN P. It trades about 0.03 of its potential returns per unit of risk. RALPH LAUREN P is currently generating about -0.08 per unit of risk. If you would invest  1,907  in Wabash National on September 4, 2024 and sell it today you would earn a total of  56.00  from holding Wabash National or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Wabash National  vs.  RALPH LAUREN P

Wabash National

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

RALPH LAUREN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RALPH LAUREN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RALPH is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wabash National and RALPH

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

The idea behind Wabash National and RALPH LAUREN P 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.