Correlation Between WSP Global and Toromont Industries

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

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

Diversification Opportunities for WSP Global and Toromont Industries

0.8

Correlation Coefficient

WSP Global  Toromont Industries

Very poor diversification

The 3 months correlation between WSP and Toromont is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding WSP Global and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries 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 Toromont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toromont Industries has no effect on the direction of WSP Global i.e., WSP Global and Toromont Industries go up and down completely randomly.

Pair Corralation between WSP Global and Toromont Industries

Assuming the 90 days trading horizon WSP Global is expected to generate 1.01 times more return on investment than Toromont Industries. However, WSP Global is 1.01 times more volatile than Toromont Industries. It trades about 0.23 of its potential returns per unit of risk. Toromont Industries is currently generating about 0.19 per unit of risk. If you would invest  24,493  in WSP Global on April 22, 2025 and sell it today you would earn a total of  4,403  from holding WSP Global or generate 17.98% return on investment over 90 days.

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

WSP Global  vs.  Toromont Industries

WSP Global

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 17 (%) 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.

Toromont Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Toromont Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Toromont Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WSP Global and Toromont Industries

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

The idea behind WSP Global and Toromont Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.