Correlation Between WPG Holdings and Topco Scientific

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

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

Diversification Opportunities for WPG Holdings and Topco Scientific

0.03

Correlation Coefficient

WPG Holdings  Topco Scientific

Significant diversification

The 3 months correlation between WPG and Topco is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding WPG Holdings and Topco Scientific Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topco Scientific and WPG Holdings 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 WPG Holdings are associated (or correlated) with Topco Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topco Scientific has no effect on the direction of WPG Holdings i.e., WPG Holdings and Topco Scientific go up and down completely randomly.

Pair Corralation between WPG Holdings and Topco Scientific

Assuming the 90 days trading horizon WPG Holdings is expected to under-perform the Topco Scientific. But the stock apears to be less risky and, when comparing its historical volatility, WPG Holdings is 1.03 times less risky than Topco Scientific. The stock trades about -0.29 of its potential returns per unit of risk. The Topco Scientific Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  30,100  in Topco Scientific Co on September 23, 2024 and sell it today you would lose (600.00) from holding Topco Scientific Co or give up 1.99% of portfolio value over 90 days.

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

WPG Holdings  vs.  Topco Scientific Co

WPG Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WPG Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Topco Scientific

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Topco Scientific Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Topco Scientific is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with WPG Holdings and Topco Scientific

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

The idea behind WPG Holdings and Topco Scientific Co 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.