Correlation Between E L and WSP Global

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

By analyzing existing cross correlation between E L Financial 3 and WSP Global, you can compare the effects of market volatilities on E L 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 E L with a short position of WSP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and WSP Global.

Diversification Opportunities for E L and WSP Global

0.41

Correlation Coefficient

E L  WSP Global

Very weak diversification

The 3 months correlation between ELF-PH and WSP is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial 3 and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global and E L 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 E L Financial 3 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 E L i.e., E L and WSP Global go up and down completely randomly.

Pair Corralation between E L and WSP Global

Assuming the 90 days trading horizon E L is expected to generate 1.06 times less return on investment than WSP Global. But when comparing it to its historical volatility, E L Financial 3 is 2.96 times less risky than WSP Global. It trades about 0.21 of its potential returns per unit of risk. WSP Global is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  27,073  in WSP Global on May 15, 2025 and sell it today you would earn a total of  1,225  from holding WSP Global or generate 4.52% return on investment over 90 days.

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

E L Financial 3  vs.  WSP Global

E L Financial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial 3 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, E L is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WSP Global

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, WSP Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with E L and WSP Global

The main advantage of trading using opposite E L and WSP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L 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 E L Financial 3 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.