Correlation Between John Wood and Quadrise Plc

Can any of the company-specific risk be diversified away by investing in both John Wood and Quadrise Plc 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 John Wood and Quadrise Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for John Wood and Quadrise Plc

-0.57

Correlation Coefficient

John Wood  Quadrise Plc

Excellent diversification

The 3 months correlation between John and Quadrise is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding John Wood Group and Quadrise Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quadrise Plc and John Wood 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 John Wood Group are associated (or correlated) with Quadrise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quadrise Plc has no effect on the direction of John Wood i.e., John Wood and Quadrise Plc go up and down completely randomly.

Pair Corralation between John Wood and Quadrise Plc

Assuming the 90 days trading horizon John Wood Group is expected to under-perform the Quadrise Plc. But the stock apears to be less risky and, when comparing its historical volatility, John Wood Group is 1.15 times less risky than Quadrise Plc. The stock trades about -0.05 of its potential returns per unit of risk. The Quadrise Plc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  160.00  in Quadrise Plc on September 13, 2024 and sell it today you would earn a total of  240.00  from holding Quadrise Plc or generate 150.0% return on investment over 90 days.

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

John Wood Group  vs.  Quadrise Plc

John Wood Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Quadrise Plc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quadrise Plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Quadrise Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with John Wood and Quadrise Plc

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

The idea behind John Wood Group and Quadrise Plc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.