Correlation Between Wajax and Bird Construction

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

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

Diversification Opportunities for Wajax and Bird Construction

0.69

Correlation Coefficient

Wajax  Bird Construction

Poor diversification

The 3 months correlation between Wajax and Bird is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Wajax and Bird Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bird Construction and Wajax 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 Wajax are associated (or correlated) with Bird Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bird Construction has no effect on the direction of Wajax i.e., Wajax and Bird Construction go up and down completely randomly.

Pair Corralation between Wajax and Bird Construction

Assuming the 90 days trading horizon Wajax is expected to generate 0.92 times more return on investment than Bird Construction. However, Wajax is 1.09 times less risky than Bird Construction. It trades about -0.09 of its potential returns per unit of risk. Bird Construction is currently generating about -0.1 per unit of risk. If you would invest  2,013  in Wajax on December 29, 2024 and sell it today you would lose (277.00) from holding Wajax or give up 13.76% of portfolio value over 90 days.

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

Wajax  vs.  Bird Construction

Wajax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wajax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Bird Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bird Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Wajax and Bird Construction

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

The idea behind Wajax and Bird Construction 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.