Correlation Between Weibo Corp and Primoris Services

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

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

Diversification Opportunities for Weibo Corp and Primoris Services

-0.21

Correlation Coefficient

Weibo Corp  Primoris Services

Very good diversification

The 3 months correlation between Weibo and Primoris is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and Primoris Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primoris Services and Weibo 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 Weibo Corp are associated (or correlated) with Primoris Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primoris Services has no effect on the direction of Weibo Corp i.e., Weibo Corp and Primoris Services go up and down completely randomly.

Pair Corralation between Weibo Corp and Primoris Services

Allowing for the 90-day total investment horizon Weibo Corp is expected to under-perform the Primoris Services. But the stock apears to be less risky and, when comparing its historical volatility, Weibo Corp is 1.12 times less risky than Primoris Services. The stock trades about -0.32 of its potential returns per unit of risk. The Primoris Services is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,850  in Primoris Services on October 10, 2024 and sell it today you would lose (48.00) from holding Primoris Services or give up 0.61% of portfolio value over 90 days.

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

Weibo Corp  vs.  Primoris Services

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Primoris Services

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primoris Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Primoris Services displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weibo Corp and Primoris Services

The main advantage of trading using opposite Weibo Corp and Primoris Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp position performs unexpectedly, Primoris Services 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 Primoris Services will offset losses from the drop in Primoris Services' long position.

The idea behind Weibo Corp and Primoris Services 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.