Correlation Between Comfort Systems and WSP Global

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

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

Diversification Opportunities for Comfort Systems and WSP Global

-0.34

Correlation Coefficient

Comfort Systems  WSP Global

Very good diversification

The 3 months correlation between Comfort and WSP is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Comfort Systems USA and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global and Comfort Systems 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 Comfort Systems USA are associated (or correlated) with WSP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WSP Global has no effect on the direction of Comfort Systems i.e., Comfort Systems and WSP Global go up and down completely randomly.

Pair Corralation between Comfort Systems and WSP Global

Considering the 90-day investment horizon Comfort Systems USA is expected to generate 1.58 times more return on investment than WSP Global. However, Comfort Systems is 1.58 times more volatile than WSP Global. It trades about -0.04 of its potential returns per unit of risk. WSP Global is currently generating about -0.14 per unit of risk. If you would invest  45,920  in Comfort Systems USA on October 11, 2024 and sell it today you would lose (893.00) from holding Comfort Systems USA or give up 1.94% of portfolio value over 90 days.

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

Comfort Systems USA  vs.  WSP Global

Comfort Systems USA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Comfort Systems USA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Comfort Systems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WSP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WSP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WSP Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Comfort Systems and WSP Global

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

The idea behind Comfort Systems USA and WSP Global 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.