Correlation Between Quality Industrial and Weir Group

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

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

Diversification Opportunities for Quality Industrial and Weir Group

0.16

Correlation Coefficient

Quality Industrial  Weir Group

Average diversification

The 3 months correlation between Quality and Weir is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Quality Industrial Corp 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 Quality Industrial 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 Quality Industrial Corp 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 Quality Industrial i.e., Quality Industrial and Weir Group go up and down completely randomly.

Pair Corralation between Quality Industrial and Weir Group

Given the investment horizon of 90 days Quality Industrial Corp is expected to generate 7.69 times more return on investment than Weir Group. However, Quality Industrial is 7.69 times more volatile than Weir Group PLC. It trades about 0.08 of its potential returns per unit of risk. Weir Group PLC is currently generating about 0.09 per unit of risk. If you would invest  6.10  in Quality Industrial Corp on September 12, 2024 and sell it today you would earn a total of  0.90  from holding Quality Industrial Corp or generate 14.75% return on investment over 90 days.

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

Quality Industrial Corp  vs.  Weir Group PLC

Quality Industrial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Industrial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Quality Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Weir Group PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weir Group PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Weir Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Quality Industrial and Weir Group

The main advantage of trading using opposite Quality Industrial and Weir Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quality Industrial 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 Quality Industrial Corp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.