Correlation Between Weir Group and Dassault Systemes

Can any of the company-specific risk be diversified away by investing in both Weir Group and Dassault Systemes 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 Weir Group and Dassault Systemes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Weir Group PLC and Dassault Systemes SA, you can compare the effects of market volatilities on Weir Group and Dassault Systemes 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 Weir Group with a short position of Dassault Systemes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weir Group and Dassault Systemes.

Diversification Opportunities for Weir Group and Dassault Systemes

-0.42

Correlation Coefficient

Weir Group  Dassault Systemes

Very good diversification

The 3 months correlation between Weir and Dassault is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Weir Group PLC and Dassault Systemes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Systemes and Weir Group 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 Weir Group PLC are associated (or correlated) with Dassault Systemes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Systemes has no effect on the direction of Weir Group i.e., Weir Group and Dassault Systemes go up and down completely randomly.

Pair Corralation between Weir Group and Dassault Systemes

Assuming the 90 days horizon Weir Group PLC is expected to generate 1.65 times more return on investment than Dassault Systemes. However, Weir Group is 1.65 times more volatile than Dassault Systemes SA. It trades about 0.08 of its potential returns per unit of risk. Dassault Systemes SA is currently generating about -0.03 per unit of risk. If you would invest  1,318  in Weir Group PLC on March 12, 2024 and sell it today you would earn a total of  42.00  from holding Weir Group PLC or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Weir Group PLC  vs.  Dassault Systemes SA

Weir Group PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weir Group PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Weir Group may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Dassault Systemes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dassault Systemes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Weir Group and Dassault Systemes

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

The idea behind Weir Group PLC and Dassault Systemes SA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.