Correlation Between ITM Power and Weir Group

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

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

Diversification Opportunities for ITM Power and Weir Group

-0.68

Correlation Coefficient

ITM Power  Weir Group

Excellent diversification

The 3 months correlation between ITM and Weir is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding ITM Power Plc 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 ITM Power 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 ITM Power Plc 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 ITM Power i.e., ITM Power and Weir Group go up and down completely randomly.

Pair Corralation between ITM Power and Weir Group

Assuming the 90 days horizon ITM Power Plc is expected to under-perform the Weir Group. In addition to that, ITM Power is 2.71 times more volatile than Weir Group PLC. It trades about -0.05 of its total potential returns per unit of risk. Weir Group PLC is currently generating about 0.12 per unit of volatility. If you would invest  1,374  in Weir Group PLC on December 27, 2024 and sell it today you would earn a total of  180.00  from holding Weir Group PLC or generate 13.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

ITM Power Plc  vs.  Weir Group PLC

ITM Power Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITM Power Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Weir Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weir Group PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Weir Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITM Power and Weir Group

The main advantage of trading using opposite ITM Power and Weir Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITM Power 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 ITM Power Plc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.