Correlation Between Woodward and National Presto

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

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

Diversification Opportunities for Woodward and National Presto

0.63

Correlation Coefficient

Woodward  National Presto

Poor diversification

The 3 months correlation between Woodward and National is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Woodward and National Presto Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Presto Indu 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 National Presto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Presto Indu has no effect on the direction of Woodward i.e., Woodward and National Presto go up and down completely randomly.

Pair Corralation between Woodward and National Presto

Considering the 90-day investment horizon Woodward is expected to generate 1.15 times more return on investment than National Presto. However, Woodward is 1.15 times more volatile than National Presto Industries. It trades about 0.22 of its potential returns per unit of risk. National Presto Industries is currently generating about 0.11 per unit of risk. If you would invest  13,601  in Woodward on February 2, 2024 and sell it today you would earn a total of  2,985  from holding Woodward or generate 21.95% return on investment over 90 days.

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

Woodward  vs.  National Presto Industries

Woodward

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Woodward are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Woodward exhibited solid returns over the last few months and may actually be approaching a breakup point.

National Presto Indu

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Presto Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, National Presto may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Woodward and National Presto

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

The idea behind Woodward and National Presto Industries 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..