Correlation Between Woodward and Blue Line

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

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

Diversification Opportunities for Woodward and Blue Line

-0.57

Correlation Coefficient

Woodward  Blue Line

Excellent diversification

The 3 months correlation between Woodward and Blue is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Woodward and Blue Line Protection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Line Protection and Woodward 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 Woodward are associated (or correlated) with Blue Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Line Protection has no effect on the direction of Woodward i.e., Woodward and Blue Line go up and down completely randomly.

Pair Corralation between Woodward and Blue Line

Considering the 90-day investment horizon Woodward is expected to generate 0.13 times more return on investment than Blue Line. However, Woodward is 7.54 times less risky than Blue Line. It trades about 0.43 of its potential returns per unit of risk. Blue Line Protection is currently generating about 0.03 per unit of risk. If you would invest  17,022  in Woodward on October 22, 2024 and sell it today you would earn a total of  1,890  from holding Woodward or generate 11.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Woodward  vs.  Blue Line Protection

Woodward

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Woodward are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Woodward exhibited solid returns over the last few months and may actually be approaching a breakup point.

Blue Line Protection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Line Protection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Blue Line is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Woodward and Blue Line

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

The idea behind Woodward and Blue Line Protection 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.