Correlation Between Northwest Pipe and Haynes International

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

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

Diversification Opportunities for Northwest Pipe and Haynes International

0.39

Correlation Coefficient

Northwest Pipe  Haynes International

Weak diversification

The 3 months correlation between Northwest and Haynes is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Pipe and Haynes International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haynes International and Northwest Pipe 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 Northwest Pipe are associated (or correlated) with Haynes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haynes International has no effect on the direction of Northwest Pipe i.e., Northwest Pipe and Haynes International go up and down completely randomly.

Pair Corralation between Northwest Pipe and Haynes International

Given the investment horizon of 90 days Northwest Pipe is expected to under-perform the Haynes International. In addition to that, Northwest Pipe is 3.51 times more volatile than Haynes International. It trades about -0.21 of its total potential returns per unit of risk. Haynes International is currently generating about -0.24 per unit of volatility. If you would invest  6,040  in Haynes International on February 4, 2024 and sell it today you would lose (116.00) from holding Haynes International or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Northwest Pipe  vs.  Haynes International

Northwest Pipe

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Pipe are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Northwest Pipe may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Haynes International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haynes International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Haynes International is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Northwest Pipe and Haynes International

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

The idea behind Northwest Pipe and Haynes International 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.