Correlation Between WSP Global and Goeasy

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

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

Diversification Opportunities for WSP Global and Goeasy

-0.17

Correlation Coefficient

WSP Global  Goeasy

Good diversification

The 3 months correlation between WSP and Goeasy is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding WSP Global and goeasy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on goeasy 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 Goeasy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of goeasy has no effect on the direction of WSP Global i.e., WSP Global and Goeasy go up and down completely randomly.

Pair Corralation between WSP Global and Goeasy

Assuming the 90 days trading horizon WSP Global is expected to generate 0.53 times more return on investment than Goeasy. However, WSP Global is 1.89 times less risky than Goeasy. It trades about 0.15 of its potential returns per unit of risk. goeasy is currently generating about -0.05 per unit of risk. If you would invest  22,827  in WSP Global on September 4, 2024 and sell it today you would earn a total of  2,086  from holding WSP Global or generate 9.14% return on investment over 90 days.

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

WSP Global  vs.  goeasy

WSP Global

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, WSP Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

goeasy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with WSP Global and Goeasy

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

The idea behind WSP Global and goeasy 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.