Correlation Between WSP Global and Comfort Systems

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

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

Diversification Opportunities for WSP Global and Comfort Systems

0.28

Correlation Coefficient

WSP Global  Comfort Systems

Modest diversification

The 3 months correlation between WSP and Comfort is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding WSP Global and Comfort Systems USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comfort Systems USA 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 Comfort Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comfort Systems USA has no effect on the direction of WSP Global i.e., WSP Global and Comfort Systems go up and down completely randomly.

Pair Corralation between WSP Global and Comfort Systems

Assuming the 90 days horizon WSP Global is expected to generate 0.47 times more return on investment than Comfort Systems. However, WSP Global is 2.13 times less risky than Comfort Systems. It trades about 0.12 of its potential returns per unit of risk. Comfort Systems USA is currently generating about -0.02 per unit of risk. If you would invest  17,464  in WSP Global on September 12, 2024 and sell it today you would earn a total of  515.00  from holding WSP Global or generate 2.95% return on investment over 90 days.

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

WSP Global  vs.  Comfort Systems USA

WSP Global

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, WSP Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Comfort Systems USA

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Comfort Systems USA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Comfort Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WSP Global and Comfort Systems

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

The idea behind WSP Global and Comfort Systems USA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.