Correlation Between Wabash National and MOLSON

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

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

Diversification Opportunities for Wabash National and MOLSON

0.1

Correlation Coefficient

Wabash National  MOLSON

Average diversification

The 3 months correlation between Wabash and MOLSON is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and MOLSON RS BREWING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOLSON RS BREWING and Wabash National 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 Wabash National are associated (or correlated) with MOLSON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOLSON RS BREWING has no effect on the direction of Wabash National i.e., Wabash National and MOLSON go up and down completely randomly.

Pair Corralation between Wabash National and MOLSON

Considering the 90-day investment horizon Wabash National is expected to generate 2.17 times more return on investment than MOLSON. However, Wabash National is 2.17 times more volatile than MOLSON RS BREWING. It trades about 0.06 of its potential returns per unit of risk. MOLSON RS BREWING is currently generating about -0.02 per unit of risk. If you would invest  1,881  in Wabash National on September 5, 2024 and sell it today you would earn a total of  130.00  from holding Wabash National or generate 6.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Wabash National  vs.  MOLSON RS BREWING

Wabash National

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Wabash National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MOLSON RS BREWING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MOLSON RS BREWING has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MOLSON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wabash National and MOLSON

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

The idea behind Wabash National and MOLSON RS BREWING 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.