Correlation Between WSP Global and AECOM

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

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

Diversification Opportunities for WSP Global and AECOM

0.71

Correlation Coefficient

WSP Global  AECOM

Poor diversification

The 3 months correlation between WSP and AECOM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding WSP Global and AECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM 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 AECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM has no effect on the direction of WSP Global i.e., WSP Global and AECOM go up and down completely randomly.

Pair Corralation between WSP Global and AECOM

Assuming the 90 days horizon WSP Global is expected to generate 1.83 times less return on investment than AECOM. But when comparing it to its historical volatility, WSP Global is 1.58 times less risky than AECOM. It trades about 0.09 of its potential returns per unit of risk. AECOM is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,078  in AECOM on September 23, 2024 and sell it today you would earn a total of  1,122  from holding AECOM or generate 12.36% return on investment over 90 days.

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

WSP Global  vs.  AECOM

WSP Global

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 7 (%) 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.

AECOM

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AECOM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WSP Global and AECOM

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

The idea behind WSP Global and AECOM 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.