Correlation Between WEC Energy and Labor Smart

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

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

Diversification Opportunities for WEC Energy and Labor Smart

0.36

Correlation Coefficient

WEC Energy  Labor Smart

Weak diversification

The 3 months correlation between WEC and Labor is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and Labor Smart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labor Smart and WEC Energy 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 WEC Energy Group are associated (or correlated) with Labor Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labor Smart has no effect on the direction of WEC Energy i.e., WEC Energy and Labor Smart go up and down completely randomly.

Pair Corralation between WEC Energy and Labor Smart

Considering the 90-day investment horizon WEC Energy is expected to generate 2.28 times less return on investment than Labor Smart. But when comparing it to its historical volatility, WEC Energy Group is 6.65 times less risky than Labor Smart. It trades about 0.24 of its potential returns per unit of risk. Labor Smart is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.15  in Labor Smart on October 21, 2024 and sell it today you would earn a total of  0.01  from holding Labor Smart or generate 6.67% return on investment over 90 days.

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

WEC Energy Group  vs.  Labor Smart

WEC Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WEC Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WEC Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Labor Smart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Labor Smart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with WEC Energy and Labor Smart

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

The idea behind WEC Energy Group and Labor Smart 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 Global Correlations module to find global opportunities by holding instruments from different markets.