Correlation Between Weir Group and Datagroup

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

Diversification Opportunities for Weir Group and Datagroup

0.67

Correlation Coefficient

Weir Group  Datagroup

Poor diversification

The 3 months correlation between Weir and Datagroup is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Weir Group PLC and Datagroup SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datagroup SE 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 Datagroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datagroup SE has no effect on the direction of Weir Group i.e., Weir Group and Datagroup go up and down completely randomly.

Pair Corralation between Weir Group and Datagroup

Assuming the 90 days trading horizon Weir Group is expected to generate 1.73 times less return on investment than Datagroup. But when comparing it to its historical volatility, Weir Group PLC is 2.22 times less risky than Datagroup. It trades about 0.05 of its potential returns per unit of risk. Datagroup SE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,390  in Datagroup SE on October 9, 2024 and sell it today you would earn a total of  210.00  from holding Datagroup SE or generate 4.78% return on investment over 90 days.

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

Weir Group PLC  vs.  Datagroup SE

Weir Group PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weir Group PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Weir Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Datagroup SE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Datagroup SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Datagroup may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Weir Group and Datagroup

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

The idea behind Weir Group PLC and Datagroup SE 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.