Correlation Between AP Moeller and WSP Global

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

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

Diversification Opportunities for AP Moeller and WSP Global

-0.54

Correlation Coefficient

AP Moeller  WSP Global

Excellent diversification

The 3 months correlation between AMKBY and WSP is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller Maersk AS and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global and AP Moeller 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 AP Moeller Maersk AS 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 AP Moeller i.e., AP Moeller and WSP Global go up and down completely randomly.

Pair Corralation between AP Moeller and WSP Global

Assuming the 90 days horizon AP Moeller is expected to generate 37.95 times less return on investment than WSP Global. In addition to that, AP Moeller is 1.91 times more volatile than WSP Global. It trades about 0.0 of its total potential returns per unit of risk. WSP Global is currently generating about 0.05 per unit of volatility. If you would invest  11,336  in WSP Global on February 21, 2024 and sell it today you would earn a total of  3,846  from holding WSP Global or generate 33.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.96%
Values	Daily Returns

AP Moeller Maersk AS  vs.  WSP Global

AP Moeller Maersk

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller Maersk AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, AP Moeller showed solid returns over the last few months and may actually be approaching a breakup point.

WSP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WSP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WSP Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AP Moeller and WSP Global

The main advantage of trading using opposite AP Moeller and WSP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Moeller 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 AP Moeller Maersk AS 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.