Correlation Between ITM Power and Weir Group
Can any of the company-specific risk be diversified away by investing in both ITM Power and Weir 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 ITM Power and Weir Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITM Power Plc and Weir Group PLC, you can compare the effects of market volatilities on ITM Power and Weir 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 ITM Power with a short position of Weir Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITM Power and Weir Group.
Diversification Opportunities for ITM Power and Weir Group
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between ITM and Weir is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding ITM Power Plc and Weir Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weir Group PLC and ITM Power 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 ITM Power Plc are associated (or correlated) with Weir Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weir Group PLC has no effect on the direction of ITM Power i.e., ITM Power and Weir Group go up and down completely randomly.
Pair Corralation between ITM Power and Weir Group
Assuming the 90 days horizon ITM Power Plc is expected to under-perform the Weir Group. In addition to that, ITM Power is 2.72 times more volatile than Weir Group PLC. It trades about -0.02 of its total potential returns per unit of risk. Weir Group PLC is currently generating about 0.05 per unit of volatility. If you would invest 1,009 in Weir Group PLC on September 3, 2024 and sell it today you would earn a total of 400.00 from holding Weir Group PLC or generate 39.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.78% |
| Values | Daily Returns |
ITM Power Plc vs. Weir Group PLC
Performance |
| Timeline |
| ITM Power Plc |
| Weir Group PLC |
ITM Power and Weir Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITM Power and Weir Group
The main advantage of trading using opposite ITM Power and Weir Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITM Power position performs unexpectedly, Weir 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 Weir Group will offset losses from the drop in Weir Group's long position.| ITM Power vs. Dear Cashmere Holding | ITM Power vs. Goff Corp | ITM Power vs. Wialan Technologies | ITM Power vs. Cgrowth Capital |
| Weir Group vs. Dear Cashmere Holding | Weir Group vs. Goff Corp | Weir Group vs. Wialan Technologies | Weir Group vs. Cgrowth Capital |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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