Correlation Between Woodward and V2X

Can any of the company-specific risk be diversified away by investing in both Woodward and V2X 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 V2X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Woodward and V2X Inc, you can compare the effects of market volatilities on Woodward and V2X 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 V2X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woodward and V2X.

Diversification Opportunities for Woodward and V2X

0.23

Correlation Coefficient

Woodward  V2X

Modest diversification

The 3 months correlation between Woodward and V2X is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Woodward and V2X Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V2X Inc 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 V2X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V2X Inc has no effect on the direction of Woodward i.e., Woodward and V2X go up and down completely randomly.

Pair Corralation between Woodward and V2X

Considering the 90-day investment horizon Woodward is expected to generate 0.58 times more return on investment than V2X. However, Woodward is 1.71 times less risky than V2X. It trades about 0.11 of its potential returns per unit of risk. V2X Inc is currently generating about 0.06 per unit of risk. If you would invest  16,966  in Woodward on December 27, 2024 and sell it today you would earn a total of  1,853  from holding Woodward or generate 10.92% return on investment over 90 days.

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

Woodward  vs.  V2X Inc

Woodward

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Woodward are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Woodward may actually be approaching a critical reversion point that can send shares even higher in April 2025.

V2X Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in V2X Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, V2X may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Woodward and V2X

The main advantage of trading using opposite Woodward and V2X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodward position performs unexpectedly, V2X 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 V2X will offset losses from the drop in V2X's long position.

The idea behind Woodward and V2X Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.