Correlation Between Willdan and CoStar

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

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

Diversification Opportunities for Willdan and CoStar

-0.38

Correlation Coefficient

Willdan  CoStar

Very good diversification

The 3 months correlation between Willdan and CoStar is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Willdan Group and CoStar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoStar Group and Willdan 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 Willdan Group are associated (or correlated) with CoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoStar Group has no effect on the direction of Willdan i.e., Willdan and CoStar go up and down completely randomly.

Pair Corralation between Willdan and CoStar

Given the investment horizon of 90 days Willdan Group is expected to generate 1.13 times more return on investment than CoStar. However, Willdan is 1.13 times more volatile than CoStar Group. It trades about 0.1 of its potential returns per unit of risk. CoStar Group is currently generating about 0.06 per unit of risk. If you would invest  3,811  in Willdan Group on August 30, 2024 and sell it today you would earn a total of  501.00  from holding Willdan Group or generate 13.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Willdan Group  vs.  CoStar Group

Willdan Group

Risk-Adjusted Performance

7 of 100

OK

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.

CoStar Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CoStar Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, CoStar may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Willdan and CoStar

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

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