Correlation Between Stantec and WSP Global

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

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

Diversification Opportunities for Stantec and WSP Global

0.42

Correlation Coefficient

Stantec  WSP Global

Very weak diversification

The 3 months correlation between Stantec and WSP is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Stantec and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global and Stantec 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 Stantec 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 Stantec i.e., Stantec and WSP Global go up and down completely randomly.

Pair Corralation between Stantec and WSP Global

Considering the 90-day investment horizon Stantec is expected to generate 1.52 times less return on investment than WSP Global. But when comparing it to its historical volatility, Stantec is 1.07 times less risky than WSP Global. It trades about 0.06 of its potential returns per unit of risk. WSP Global is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13,553  in WSP Global on September 12, 2024 and sell it today you would earn a total of  4,426  from holding WSP Global or generate 32.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	76.42%
Values	Daily Returns

Stantec  vs.  WSP Global

Stantec

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stantec are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Stantec may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WSP Global

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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 Stantec and WSP Global

The main advantage of trading using opposite Stantec and WSP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stantec 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 Stantec 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..