Correlation Between Auction Technology and Weir Group

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

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

Diversification Opportunities for Auction Technology and Weir Group

0.82

Correlation Coefficient

Auction Technology  Weir Group

Very poor diversification

The 3 months correlation between Auction and Weir is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Auction Technology Group and Weir Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weir Group PLC and Auction Technology 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 Auction Technology Group are associated (or correlated) with Weir Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weir Group PLC has no effect on the direction of Auction Technology i.e., Auction Technology and Weir Group go up and down completely randomly.

Pair Corralation between Auction Technology and Weir Group

Assuming the 90 days trading horizon Auction Technology Group is expected to generate 2.35 times more return on investment than Weir Group. However, Auction Technology is 2.35 times more volatile than Weir Group PLC. It trades about 0.17 of its potential returns per unit of risk. Weir Group PLC is currently generating about 0.15 per unit of risk. If you would invest  44,100  in Auction Technology Group on October 24, 2024 and sell it today you would earn a total of  14,200  from holding Auction Technology Group or generate 32.2% return on investment over 90 days.

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

Auction Technology Group  vs.  Weir Group PLC

Auction Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Auction Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Weir Group PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weir Group PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Weir Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Auction Technology and Weir Group

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

The idea behind Auction Technology Group and Weir Group PLC 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.