Correlation Between Panasonic Corp and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Panasonic Corp 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 Panasonic Corp and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Panasonic Corp and WPP PLC, you can compare the effects of market volatilities on Panasonic Corp 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 Panasonic Corp with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Panasonic Corp and WPP PLC.
Diversification Opportunities for Panasonic Corp and WPP PLC
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Panasonic and WPP is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Panasonic Corp and WPP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC and Panasonic Corp 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 Panasonic Corp 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 Panasonic Corp i.e., Panasonic Corp and WPP PLC go up and down completely randomly.
Pair Corralation between Panasonic Corp and WPP PLC
Assuming the 90 days trading horizon Panasonic Corp is expected to generate 1.15 times less return on investment than WPP PLC. In addition to that, Panasonic Corp is 1.53 times more volatile than WPP PLC. It trades about 0.04 of its total potential returns per unit of risk. WPP PLC is currently generating about 0.07 per unit of volatility. If you would invest 71,252 in WPP PLC on September 14, 2024 and sell it today you would earn a total of 17,468 from holding WPP PLC or generate 24.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 80.48% |
| Values | Daily Returns |
Panasonic Corp vs. WPP PLC
Performance |
| Timeline |
| Panasonic Corp |
| WPP PLC |
Panasonic Corp and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Panasonic Corp and WPP PLC
The main advantage of trading using opposite Panasonic Corp and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Panasonic Corp 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.| Panasonic Corp vs. Fidelity National Information | Panasonic Corp vs. Silvercorp Metals | Panasonic Corp vs. Cairo Communication SpA | Panasonic Corp vs. Zoom Video Communications |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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