Correlation Between Westport Fuel and Soho House

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Can any of the company-specific risk be diversified away by investing in both Westport Fuel and Soho House 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 Westport Fuel and Soho House into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westport Fuel Systems and Soho House Co, you can compare the effects of market volatilities on Westport Fuel and Soho House 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 Westport Fuel with a short position of Soho House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westport Fuel and Soho House.

Diversification Opportunities for Westport Fuel and Soho House

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Westport and Soho is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Westport Fuel Systems and Soho House Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soho House and Westport Fuel 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 Westport Fuel Systems are associated (or correlated) with Soho House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soho House has no effect on the direction of Westport Fuel i.e., Westport Fuel and Soho House go up and down completely randomly.

Pair Corralation between Westport Fuel and Soho House

Given the investment horizon of 90 days Westport Fuel Systems is expected to under-perform the Soho House. But the stock apears to be less risky and, when comparing its historical volatility, Westport Fuel Systems is 2.85 times less risky than Soho House. The stock trades about -0.1 of its potential returns per unit of risk. The Soho House Co is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  471.00  in Soho House Co on October 9, 2024 and sell it today you would earn a total of  291.00  from holding Soho House Co or generate 61.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Westport Fuel Systems  vs.  Soho House Co

 Performance 
       Timeline  
Westport Fuel Systems 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Westport Fuel Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Westport Fuel is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Soho House 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Soho House Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Soho House displayed solid returns over the last few months and may actually be approaching a breakup point.

Westport Fuel and Soho House Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Westport Fuel and Soho House

The main advantage of trading using opposite Westport Fuel and Soho House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westport Fuel position performs unexpectedly, Soho House 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 Soho House will offset losses from the drop in Soho House's long position.
The idea behind Westport Fuel Systems and Soho House Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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