Correlation Between WSP Global and FirstService Corp

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

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

Diversification Opportunities for WSP Global and FirstService Corp

0.37

Correlation Coefficient

WSP Global  FirstService Corp

Weak diversification

The 3 months correlation between WSP and FirstService is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding WSP Global and FirstService Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstService Corp 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 FirstService Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstService Corp has no effect on the direction of WSP Global i.e., WSP Global and FirstService Corp go up and down completely randomly.

Pair Corralation between WSP Global and FirstService Corp

Assuming the 90 days trading horizon WSP Global is expected to generate 1.21 times more return on investment than FirstService Corp. However, WSP Global is 1.21 times more volatile than FirstService Corp. It trades about -0.01 of its potential returns per unit of risk. FirstService Corp is currently generating about -0.1 per unit of risk. If you would invest  25,446  in WSP Global on December 28, 2024 and sell it today you would lose (552.00) from holding WSP Global or give up 2.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

WSP Global  vs.  FirstService Corp

WSP Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days WSP Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, WSP Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

FirstService Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FirstService Corp 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 FirstService Corp

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

The idea behind WSP Global and FirstService Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.