Correlation Between Curtiss Wright and CVD Equipment

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

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

Diversification Opportunities for Curtiss Wright and CVD Equipment

0.41

Correlation Coefficient

Curtiss Wright  CVD Equipment

Very weak diversification

The 3 months correlation between Curtiss and CVD is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Curtiss Wright and CVD Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVD Equipment and Curtiss Wright 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 Curtiss Wright are associated (or correlated) with CVD Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVD Equipment has no effect on the direction of Curtiss Wright i.e., Curtiss Wright and CVD Equipment go up and down completely randomly.

Pair Corralation between Curtiss Wright and CVD Equipment

Allowing for the 90-day total investment horizon Curtiss Wright is expected to generate 0.23 times more return on investment than CVD Equipment. However, Curtiss Wright is 4.26 times less risky than CVD Equipment. It trades about 0.14 of its potential returns per unit of risk. CVD Equipment is currently generating about -0.04 per unit of risk. If you would invest  19,134  in Curtiss Wright on January 23, 2024 and sell it today you would earn a total of  5,961  from holding Curtiss Wright or generate 31.15% return on investment over 90 days.

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

Curtiss Wright  vs.  CVD Equipment

Curtiss Wright

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Curtiss Wright are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Curtiss Wright may actually be approaching a critical reversion point that can send shares even higher in May 2024.

CVD Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVD Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CVD Equipment is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Curtiss Wright and CVD Equipment

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

The idea behind Curtiss Wright and CVD Equipment 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.