Correlation Between WSP Global and INDO RAMA

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

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

Diversification Opportunities for WSP Global and INDO RAMA

0.0

Correlation Coefficient

WSP Global  INDO RAMA

Pay attention - limited upside

The 3 months correlation between WSP and INDO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding WSP Global and INDO RAMA SYNTHETIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDO RAMA SYNTHETIC and WSP Global 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 WSP Global are associated (or correlated) with INDO RAMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDO RAMA SYNTHETIC has no effect on the direction of WSP Global i.e., WSP Global and INDO RAMA go up and down completely randomly.

Pair Corralation between WSP Global and INDO RAMA

Assuming the 90 days horizon WSP Global is expected to generate 0.77 times more return on investment than INDO RAMA. However, WSP Global is 1.3 times less risky than INDO RAMA. It trades about 0.07 of its potential returns per unit of risk. INDO RAMA SYNTHETIC is currently generating about 0.05 per unit of risk. If you would invest  13,598  in WSP Global on October 2, 2024 and sell it today you would earn a total of  3,302  from holding WSP Global or generate 24.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

WSP Global  vs.  INDO RAMA SYNTHETIC

WSP Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WSP Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

INDO RAMA SYNTHETIC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with WSP Global and INDO RAMA

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

The idea behind WSP Global and INDO RAMA SYNTHETIC 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.