Correlation Between Vestas Wind and CSW Industrials

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Can any of the company-specific risk be diversified away by investing in both Vestas Wind and CSW Industrials 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 Vestas Wind and CSW Industrials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and CSW Industrials, you can compare the effects of market volatilities on Vestas Wind and CSW Industrials 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 Vestas Wind with a short position of CSW Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and CSW Industrials.

Diversification Opportunities for Vestas Wind and CSW Industrials

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Vestas and CSW is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and CSW Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSW Industrials and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with CSW Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSW Industrials has no effect on the direction of Vestas Wind i.e., Vestas Wind and CSW Industrials go up and down completely randomly.

Pair Corralation between Vestas Wind and CSW Industrials

Assuming the 90 days horizon Vestas Wind is expected to generate 11.34 times less return on investment than CSW Industrials. In addition to that, Vestas Wind is 1.51 times more volatile than CSW Industrials. It trades about 0.01 of its total potential returns per unit of risk. CSW Industrials is currently generating about 0.1 per unit of volatility. If you would invest  10,677  in CSW Industrials on December 30, 2023 and sell it today you would earn a total of  12,783  from holding CSW Industrials or generate 119.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Vestas Wind Systems  vs.  CSW Industrials

 Performance 
       Timeline  
Vestas Wind Systems 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
CSW Industrials 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CSW Industrials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, CSW Industrials demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Vestas Wind and CSW Industrials Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vestas Wind and CSW Industrials

The main advantage of trading using opposite Vestas Wind and CSW Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind position performs unexpectedly, CSW Industrials 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 CSW Industrials will offset losses from the drop in CSW Industrials' long position.
The idea behind Vestas Wind Systems and CSW Industrials 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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