Correlation Between Synalloy and Webco Industries

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

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

Diversification Opportunities for Synalloy and Webco Industries

-0.17

Correlation Coefficient

Synalloy  Webco Industries

Good diversification

The 3 months correlation between Synalloy and Webco is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Synalloy and Webco Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webco Industries and Synalloy 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 Synalloy are associated (or correlated) with Webco Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webco Industries has no effect on the direction of Synalloy i.e., Synalloy and Webco Industries go up and down completely randomly.

Pair Corralation between Synalloy and Webco Industries

If you would invest  950.00  in Synalloy on September 5, 2024 and sell it today you would earn a total of  263.00  from holding Synalloy or generate 27.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Synalloy  vs.  Webco Industries

Synalloy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Synalloy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Synalloy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Webco Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Webco Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Webco Industries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Synalloy and Webco Industries

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

The idea behind Synalloy and Webco 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.