Correlation Between Kingspan Group and WSP Global

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

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

Diversification Opportunities for Kingspan Group and WSP Global

-0.12

Correlation Coefficient

Kingspan Group  WSP Global

Good diversification

The 3 months correlation between Kingspan and WSP is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kingspan Group PLC and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global and Kingspan Group 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 Kingspan Group PLC 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 Kingspan Group i.e., Kingspan Group and WSP Global go up and down completely randomly.

Pair Corralation between Kingspan Group and WSP Global

Assuming the 90 days horizon Kingspan Group PLC is expected to generate 1.58 times more return on investment than WSP Global. However, Kingspan Group is 1.58 times more volatile than WSP Global. It trades about 0.1 of its potential returns per unit of risk. WSP Global is currently generating about -0.04 per unit of risk. If you would invest  7,275  in Kingspan Group PLC on December 29, 2024 and sell it today you would earn a total of  1,122  from holding Kingspan Group PLC or generate 15.42% return on investment over 90 days.

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

Kingspan Group PLC  vs.  WSP Global

Kingspan Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingspan Group PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Kingspan Group showed solid returns over the last few months and may actually be approaching a breakup point.

WSP Global

Risk-Adjusted Performance

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 Kingspan Group and WSP Global

The main advantage of trading using opposite Kingspan Group and WSP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingspan Group 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 Kingspan Group PLC 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.