Correlation Between Power Financial and WSP Global

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

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

Diversification Opportunities for Power Financial and WSP Global

0.85

Correlation Coefficient

Power Financial  WSP Global

Very poor diversification

The 3 months correlation between Power and WSP is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Power Financial Corp and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global and Power Financial 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 Power Financial Corp are associated (or correlated) with WSP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WSP Global has no effect on the direction of Power Financial i.e., Power Financial and WSP Global go up and down completely randomly.

Pair Corralation between Power Financial and WSP Global

Assuming the 90 days trading horizon Power Financial is expected to generate 2.88 times less return on investment than WSP Global. But when comparing it to its historical volatility, Power Financial Corp is 1.96 times less risky than WSP Global. It trades about 0.16 of its potential returns per unit of risk. WSP Global is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  24,416  in WSP Global on April 20, 2025 and sell it today you would earn a total of  4,480  from holding WSP Global or generate 18.35% return on investment over 90 days.

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

Power Financial Corp  vs.  WSP Global

Power Financial Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power Financial Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Power Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

WSP Global

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, WSP Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Financial and WSP Global

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

The idea behind Power Financial Corp and WSP Global 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.