Correlation Between Weir Group and Ballard Power

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

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

Diversification Opportunities for Weir Group and Ballard Power

0.01

Correlation Coefficient

Weir Group  Ballard Power

Significant diversification

The 3 months correlation between Weir and Ballard is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Weir Group PLC and Ballard Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballard Power Systems and Weir 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 Weir Group PLC are associated (or correlated) with Ballard Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballard Power Systems has no effect on the direction of Weir Group i.e., Weir Group and Ballard Power go up and down completely randomly.

Pair Corralation between Weir Group and Ballard Power

Assuming the 90 days horizon Weir Group PLC is expected to generate 0.33 times more return on investment than Ballard Power. However, Weir Group PLC is 3.0 times less risky than Ballard Power. It trades about 0.14 of its potential returns per unit of risk. Ballard Power Systems is currently generating about -0.08 per unit of risk. If you would invest  1,334  in Weir Group PLC on September 4, 2024 and sell it today you would earn a total of  74.00  from holding Weir Group PLC or generate 5.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Weir Group PLC  vs.  Ballard Power Systems

Weir Group PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weir Group PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Weir Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ballard Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ballard Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Weir Group and Ballard Power

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

The idea behind Weir Group PLC and Ballard Power Systems 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 Transaction History module to view history of all your transactions and understand their impact on performance.