Correlation Between Wartsila Oyj and Weir Group
Can any of the company-specific risk be diversified away by investing in both Wartsila Oyj 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 Wartsila Oyj and Weir Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wartsila Oyj Abp and Weir Group PLC, you can compare the effects of market volatilities on Wartsila Oyj 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 Wartsila Oyj with a short position of Weir Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wartsila Oyj and Weir Group.
Diversification Opportunities for Wartsila Oyj and Weir Group
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wartsila and Weir is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp 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 Wartsila Oyj 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 Wartsila Oyj Abp 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 Wartsila Oyj i.e., Wartsila Oyj and Weir Group go up and down completely randomly.
Pair Corralation between Wartsila Oyj and Weir Group
Assuming the 90 days horizon Wartsila Oyj Abp is expected to under-perform the Weir Group. In addition to that, Wartsila Oyj is 1.19 times more volatile than Weir Group PLC. It trades about -0.11 of its total potential returns per unit of risk. Weir Group PLC is currently generating about -0.1 per unit of volatility. If you would invest 1,542 in Weir Group PLC on January 11, 2025 and sell it today you would lose (163.00) from holding Weir Group PLC or give up 10.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wartsila Oyj Abp vs. Weir Group PLC
Performance |
| Timeline |
| Wartsila Oyj Abp |
| Weir Group PLC |
Wartsila Oyj and Weir Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wartsila Oyj and Weir Group
The main advantage of trading using opposite Wartsila Oyj and Weir Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wartsila Oyj 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.| Wartsila Oyj vs. Alfa Laval AB | Wartsila Oyj vs. Arista Power | Wartsila Oyj vs. Atlas Copco AB | Wartsila Oyj vs. American Commerce Solutions |
| Weir Group vs. Alfa Laval AB | Weir Group vs. Arista Power | Weir Group vs. Atlas Copco AB | Weir Group vs. American Commerce Solutions |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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