Correlation Between CGI and WSP Global
Can any of the company-specific risk be diversified away by investing in both CGI 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 CGI and WSP Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CGI Inc and WSP Global, you can compare the effects of market volatilities on CGI 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 CGI with a short position of WSP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of CGI and WSP Global.
Diversification Opportunities for CGI and WSP Global
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CGI and WSP is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CGI Inc and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global and CGI 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 CGI Inc 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 CGI i.e., CGI and WSP Global go up and down completely randomly.
Pair Corralation between CGI and WSP Global
Assuming the 90 days trading horizon CGI is expected to generate 1.47 times less return on investment than WSP Global. But when comparing it to its historical volatility, CGI Inc is 1.07 times less risky than WSP Global. It trades about 0.06 of its potential returns per unit of risk. WSP Global is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 15,877 in WSP Global on August 28, 2024 and sell it today you would earn a total of 9,008 from holding WSP Global or generate 56.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CGI Inc vs. WSP Global
Performance |
| Timeline |
| CGI Inc |
| WSP Global |
CGI and WSP Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CGI and WSP Global
The main advantage of trading using opposite CGI and WSP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CGI 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 CGI Inc 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.| WSP Global vs. TFI International | WSP Global vs. Stantec | WSP Global vs. Waste Connections | WSP Global vs. CGI Inc |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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