Correlation Between Westport Fuel and Bird Construction

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

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

Diversification Opportunities for Westport Fuel and Bird Construction

-0.47

Correlation Coefficient

Westport Fuel  Bird Construction

Very good diversification

The 3 months correlation between Westport and Bird is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Westport Fuel Systems and Bird Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bird Construction and Westport Fuel 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 Westport Fuel Systems are associated (or correlated) with Bird Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bird Construction has no effect on the direction of Westport Fuel i.e., Westport Fuel and Bird Construction go up and down completely randomly.

Pair Corralation between Westport Fuel and Bird Construction

Assuming the 90 days trading horizon Westport Fuel Systems is expected to under-perform the Bird Construction. In addition to that, Westport Fuel is 1.8 times more volatile than Bird Construction. It trades about -0.01 of its total potential returns per unit of risk. Bird Construction is currently generating about 0.14 per unit of volatility. If you would invest  734.00  in Bird Construction on September 14, 2024 and sell it today you would earn a total of  1,978  from holding Bird Construction or generate 269.48% return on investment over 90 days.

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

Westport Fuel Systems  vs.  Bird Construction

Westport Fuel Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westport Fuel Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Bird Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bird Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bird Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westport Fuel and Bird Construction

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

The idea behind Westport Fuel Systems and Bird Construction 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.