Correlation Between Derwent London and Workspace Group

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

By analyzing existing cross correlation between Derwent London PLC and Workspace Group PLC, you can compare the effects of market volatilities on Derwent London and Workspace Group 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 Derwent London with a short position of Workspace Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Derwent London and Workspace Group.

Diversification Opportunities for Derwent London and Workspace Group

0.04

Correlation Coefficient

Derwent London  Workspace Group

Significant diversification

The 3 months correlation between Derwent and Workspace is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Derwent London PLC and Workspace Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workspace Group PLC and Derwent London 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 Derwent London PLC are associated (or correlated) with Workspace Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workspace Group PLC has no effect on the direction of Derwent London i.e., Derwent London and Workspace Group go up and down completely randomly.

Pair Corralation between Derwent London and Workspace Group

Assuming the 90 days trading horizon Derwent London PLC is expected to generate 0.78 times more return on investment than Workspace Group. However, Derwent London PLC is 1.28 times less risky than Workspace Group. It trades about 0.06 of its potential returns per unit of risk. Workspace Group PLC is currently generating about -0.02 per unit of risk. If you would invest  189,550  in Derwent London PLC on April 23, 2025 and sell it today you would earn a total of  9,050  from holding Derwent London PLC or generate 4.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Derwent London PLC  vs.  Workspace Group PLC

Derwent London PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Derwent London PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Derwent London is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Workspace Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Workspace Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Workspace Group is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Derwent London and Workspace Group

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

The idea behind Derwent London PLC and Workspace Group PLC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.