Correlation Between WSP Global and Cargojet

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

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

Diversification Opportunities for WSP Global and Cargojet

0.31

Correlation Coefficient

WSP Global  Cargojet

Weak diversification

The 3 months correlation between WSP and Cargojet is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding WSP Global and Cargojet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cargojet and WSP Global 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 WSP Global are associated (or correlated) with Cargojet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cargojet has no effect on the direction of WSP Global i.e., WSP Global and Cargojet go up and down completely randomly.

Pair Corralation between WSP Global and Cargojet

Assuming the 90 days trading horizon WSP Global is expected to generate 0.57 times more return on investment than Cargojet. However, WSP Global is 1.75 times less risky than Cargojet. It trades about 0.16 of its potential returns per unit of risk. Cargojet is currently generating about -0.07 per unit of risk. If you would invest  22,561  in WSP Global on September 3, 2024 and sell it today you would earn a total of  2,336  from holding WSP Global or generate 10.35% return on investment over 90 days.

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

WSP Global  vs.  Cargojet

WSP Global

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, WSP Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cargojet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cargojet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with WSP Global and Cargojet

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

The idea behind WSP Global and Cargojet 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.