Correlation Between Verizon Communications and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and WPP PLC 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 Verizon Communications and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and WPP PLC, you can compare the effects of market volatilities on Verizon Communications and WPP PLC 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 Verizon Communications with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and WPP PLC.
Diversification Opportunities for Verizon Communications and WPP PLC
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Verizon and WPP is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and WPP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC and Verizon Communications 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 Verizon Communications are associated (or correlated) with WPP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP PLC has no effect on the direction of Verizon Communications i.e., Verizon Communications and WPP PLC go up and down completely randomly.
Pair Corralation between Verizon Communications and WPP PLC
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.75 times more return on investment than WPP PLC. However, Verizon Communications is 1.33 times less risky than WPP PLC. It trades about 0.31 of its potential returns per unit of risk. WPP PLC is currently generating about 0.16 per unit of risk. If you would invest 4,110 in Verizon Communications on September 4, 2024 and sell it today you would earn a total of 283.00 from holding Verizon Communications or generate 6.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. WPP PLC
Performance |
| Timeline |
| Verizon Communications |
| WPP PLC |
Verizon Communications and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and WPP PLC
The main advantage of trading using opposite Verizon Communications and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, WPP PLC 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 WPP PLC will offset losses from the drop in WPP PLC's long position.| Verizon Communications vs. Samsung Electronics Co | Verizon Communications vs. Samsung Electronics Co | Verizon Communications vs. Hyundai Motor | Verizon Communications vs. Toyota Motor Corp |
| WPP PLC vs. Tatton Asset Management | WPP PLC vs. Cognizant Technology Solutions | WPP PLC vs. Vitec Software Group | WPP PLC vs. X FAB Silicon Foundries |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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