Correlation Between Quant and WAXP

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

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

Diversification Opportunities for Quant and WAXP

-0.32

Correlation Coefficient

Quant  WAXP

Very good diversification

The 3 months correlation between Quant and WAXP is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Quant and WAXP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WAXP and Quant 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 Quant are associated (or correlated) with WAXP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WAXP has no effect on the direction of Quant i.e., Quant and WAXP go up and down completely randomly.

Pair Corralation between Quant and WAXP

Assuming the 90 days trading horizon Quant is expected to generate 1.23 times more return on investment than WAXP. However, Quant is 1.23 times more volatile than WAXP. It trades about 0.21 of its potential returns per unit of risk. WAXP is currently generating about -0.01 per unit of risk. If you would invest  7,464  in Quant on April 24, 2025 and sell it today you would earn a total of  6,032  from holding Quant or generate 80.81% return on investment over 90 days.

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

Quant  vs.  WAXP

Quant

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quant are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Quant exhibited solid returns over the last few months and may actually be approaching a breakup point.

WAXP

Risk-Adjusted Performance

Weak

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

Pair Trading with Quant and WAXP

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

The idea behind Quant and WAXP 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.