Correlation Between DLH Holdings and Willdan

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

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

Diversification Opportunities for DLH Holdings and Willdan

-0.82

Correlation Coefficient

DLH Holdings  Willdan

Pay attention - limited upside

The 3 months correlation between DLH and Willdan is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding DLH Holdings Corp and Willdan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willdan Group and DLH Holdings 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 DLH Holdings Corp are associated (or correlated) with Willdan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willdan Group has no effect on the direction of DLH Holdings i.e., DLH Holdings and Willdan go up and down completely randomly.

Pair Corralation between DLH Holdings and Willdan

Given the investment horizon of 90 days DLH Holdings Corp is expected to under-perform the Willdan. In addition to that, DLH Holdings is 1.04 times more volatile than Willdan Group. It trades about -0.15 of its total potential returns per unit of risk. Willdan Group is currently generating about 0.1 per unit of volatility. If you would invest  3,811  in Willdan Group on August 30, 2024 and sell it today you would earn a total of  507.00  from holding Willdan Group or generate 13.3% return on investment over 90 days.

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

DLH Holdings Corp  vs.  Willdan Group

DLH Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DLH Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Willdan Group

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Willdan Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Willdan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DLH Holdings and Willdan

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

The idea behind DLH Holdings Corp and Willdan Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.