Correlation Between WSP Global and Savaria

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

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

Diversification Opportunities for WSP Global and Savaria

0.75

Correlation Coefficient

WSP Global  Savaria

Poor diversification

The 3 months correlation between WSP and Savaria is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding WSP Global and Savaria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Savaria 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 Savaria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Savaria has no effect on the direction of WSP Global i.e., WSP Global and Savaria go up and down completely randomly.

Pair Corralation between WSP Global and Savaria

Assuming the 90 days trading horizon WSP Global is expected to generate 0.53 times more return on investment than Savaria. However, WSP Global is 1.89 times less risky than Savaria. It trades about 0.14 of its potential returns per unit of risk. Savaria is currently generating about 0.05 per unit of risk. If you would invest  22,826  in WSP Global on September 5, 2024 and sell it today you would earn a total of  1,959  from holding WSP Global or generate 8.58% return on investment over 90 days.

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

WSP Global  vs.  Savaria

WSP Global

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 10 (%) 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.

Savaria

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Savaria are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Savaria is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WSP Global and Savaria

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

The idea behind WSP Global and Savaria 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.