Correlation Between Weir Group and Rosinbomb

Can any of the company-specific risk be diversified away by investing in both Weir Group and Rosinbomb 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 Rosinbomb 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 Rosinbomb, you can compare the effects of market volatilities on Weir Group and Rosinbomb 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 Rosinbomb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weir Group and Rosinbomb.

Diversification Opportunities for Weir Group and Rosinbomb

0.65

Correlation Coefficient

Weir Group  Rosinbomb

Poor diversification

The 3 months correlation between Weir and Rosinbomb is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Weir Group PLC and Rosinbomb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rosinbomb 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 Rosinbomb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rosinbomb has no effect on the direction of Weir Group i.e., Weir Group and Rosinbomb go up and down completely randomly.

Pair Corralation between Weir Group and Rosinbomb

Assuming the 90 days horizon Weir Group is expected to generate 10.49 times less return on investment than Rosinbomb. But when comparing it to its historical volatility, Weir Group PLC is 5.25 times less risky than Rosinbomb. It trades about 0.1 of its potential returns per unit of risk. Rosinbomb is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  0.40  in Rosinbomb on December 29, 2024 and sell it today you would earn a total of  0.59  from holding Rosinbomb or generate 147.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Weir Group PLC  vs.  Rosinbomb

Weir Group PLC

Risk-Adjusted Performance

OK

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

Rosinbomb

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rosinbomb are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Rosinbomb displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weir Group and Rosinbomb

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

The idea behind Weir Group PLC and Rosinbomb 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .