Correlation Between WGRT and Shrapnel

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

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

Diversification Opportunities for WGRT and Shrapnel

0.74

Correlation Coefficient

WGRT  Shrapnel

Poor diversification

The 3 months correlation between WGRT and Shrapnel is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding WGRT and Shrapnel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shrapnel and WGRT 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 WGRT are associated (or correlated) with Shrapnel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shrapnel has no effect on the direction of WGRT i.e., WGRT and Shrapnel go up and down completely randomly.

Pair Corralation between WGRT and Shrapnel

Assuming the 90 days trading horizon WGRT is expected to generate 0.17 times more return on investment than Shrapnel. However, WGRT is 6.05 times less risky than Shrapnel. It trades about 0.06 of its potential returns per unit of risk. Shrapnel is currently generating about -0.1 per unit of risk. If you would invest  1.35  in WGRT on January 30, 2024 and sell it today you would earn a total of  0.03  from holding WGRT or generate 2.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

WGRT  vs.  Shrapnel

WGRT

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in WGRT are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, WGRT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Shrapnel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shrapnel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Shrapnel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WGRT and Shrapnel

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

The idea behind WGRT and Shrapnel 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.