Correlation Between WESCO International and Indutrade

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

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

Diversification Opportunities for WESCO International and Indutrade

-0.8

Correlation Coefficient

WESCO International  Indutrade

Pay attention - limited upside

The 3 months correlation between WESCO and Indutrade is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding WESCO International and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and WESCO International 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 WESCO International are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of WESCO International i.e., WESCO International and Indutrade go up and down completely randomly.

Pair Corralation between WESCO International and Indutrade

Assuming the 90 days horizon WESCO International is expected to generate 1.96 times more return on investment than Indutrade. However, WESCO International is 1.96 times more volatile than Indutrade AB. It trades about 0.08 of its potential returns per unit of risk. Indutrade AB is currently generating about -0.18 per unit of risk. If you would invest  15,266  in WESCO International on September 26, 2024 and sell it today you would earn a total of  1,734  from holding WESCO International or generate 11.36% return on investment over 90 days.

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

WESCO International  vs.  Indutrade AB

WESCO International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WESCO International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WESCO International reported solid returns over the last few months and may actually be approaching a breakup point.

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with WESCO International and Indutrade

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

The idea behind WESCO International and Indutrade AB 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.