Correlation Between FirstService Corp and WSP Global

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

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

Diversification Opportunities for FirstService Corp and WSP Global

0.75

Correlation Coefficient

FirstService Corp  WSP Global

Poor diversification

The 3 months correlation between FirstService and WSP is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding FirstService Corp and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global and FirstService Corp 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 FirstService Corp 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 FirstService Corp i.e., FirstService Corp and WSP Global go up and down completely randomly.

Pair Corralation between FirstService Corp and WSP Global

Assuming the 90 days trading horizon FirstService Corp is expected to generate 1.02 times more return on investment than WSP Global. However, FirstService Corp is 1.02 times more volatile than WSP Global. It trades about 0.18 of its potential returns per unit of risk. WSP Global is currently generating about 0.15 per unit of risk. If you would invest  24,176  in FirstService Corp on September 4, 2024 and sell it today you would earn a total of  2,851  from holding FirstService Corp or generate 11.79% return on investment over 90 days.

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

FirstService Corp  vs.  WSP Global

FirstService Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FirstService Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WSP Global

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with FirstService Corp and WSP Global

The main advantage of trading using opposite FirstService Corp and WSP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstService Corp 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 FirstService Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.