Correlation Between Stellar and Willdan

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

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

Diversification Opportunities for Stellar and Willdan

-0.65

Correlation Coefficient

Stellar  Willdan

Excellent diversification

The 3 months correlation between Stellar and Willdan is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Willdan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willdan Group and Stellar 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 Stellar are associated (or correlated) with Willdan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willdan Group has no effect on the direction of Stellar i.e., Stellar and Willdan go up and down completely randomly.

Pair Corralation between Stellar and Willdan

Assuming the 90 days trading horizon Stellar is expected to generate 5.93 times more return on investment than Willdan. However, Stellar is 5.93 times more volatile than Willdan Group. It trades about 0.25 of its potential returns per unit of risk. Willdan Group is currently generating about -0.13 per unit of risk. If you would invest  9.41  in Stellar on October 25, 2024 and sell it today you would earn a total of  33.59  from holding Stellar or generate 356.96% return on investment over 90 days.

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

Stellar  vs.  Willdan Group

Stellar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Willdan Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willdan Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Stellar and Willdan

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

The idea behind Stellar and Willdan Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.