Correlation Between Widepoint and Global Develpmts

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

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

Diversification Opportunities for Widepoint and Global Develpmts

0.61

Correlation Coefficient

Widepoint  Global Develpmts

Poor diversification

The 3 months correlation between Widepoint and Global is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Widepoint C and Global Develpmts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Develpmts and Widepoint 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 Widepoint C are associated (or correlated) with Global Develpmts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Develpmts has no effect on the direction of Widepoint i.e., Widepoint and Global Develpmts go up and down completely randomly.

Pair Corralation between Widepoint and Global Develpmts

Considering the 90-day investment horizon Widepoint C is expected to under-perform the Global Develpmts. But the stock apears to be less risky and, when comparing its historical volatility, Widepoint C is 3.33 times less risky than Global Develpmts. The stock trades about -0.16 of its potential returns per unit of risk. The Global Develpmts is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1.20  in Global Develpmts on December 29, 2024 and sell it today you would lose (0.26) from holding Global Develpmts or give up 21.67% of portfolio value over 90 days.

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

Widepoint C  vs.  Global Develpmts

Widepoint C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Widepoint C has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Global Develpmts

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Develpmts are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Global Develpmts displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Widepoint and Global Develpmts

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

The idea behind Widepoint C and Global Develpmts 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.