Correlation Between Worthington Industries and Northwest Pipe

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

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

Diversification Opportunities for Worthington Industries and Northwest Pipe

0.23

Correlation Coefficient

Worthington Industries  Northwest Pipe

Modest diversification

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

Pair Corralation between Worthington Industries and Northwest Pipe

Considering the 90-day investment horizon Worthington Industries is expected to under-perform the Northwest Pipe. In addition to that, Worthington Industries is 1.0 times more volatile than Northwest Pipe. It trades about -0.1 of its total potential returns per unit of risk. Northwest Pipe is currently generating about 0.11 per unit of volatility. If you would invest  2,907  in Northwest Pipe on February 1, 2024 and sell it today you would earn a total of  258.00  from holding Northwest Pipe or generate 8.88% return on investment over 90 days.

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

Worthington Industries  vs.  Northwest Pipe

Worthington Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worthington Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Worthington Industries is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Northwest Pipe

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Pipe are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Northwest Pipe is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Worthington Industries and Northwest Pipe

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

The idea behind Worthington Industries and Northwest Pipe 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .