Correlation Between Bell Food and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Bell Food 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 Bell Food and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bell Food Group and WPP PLC, you can compare the effects of market volatilities on Bell Food 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 Bell Food with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bell Food and WPP PLC.
Diversification Opportunities for Bell Food and WPP PLC
Good diversification
The 3 months correlation between Bell and WPP is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bell Food Group and WPP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC and Bell Food 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 Bell Food Group 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 Bell Food i.e., Bell Food and WPP PLC go up and down completely randomly.
Pair Corralation between Bell Food and WPP PLC
Assuming the 90 days trading horizon Bell Food is expected to generate 14.06 times less return on investment than WPP PLC. But when comparing it to its historical volatility, Bell Food Group is 1.76 times less risky than WPP PLC. It trades about 0.03 of its potential returns per unit of risk. WPP PLC is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 82,780 in WPP PLC on September 13, 2024 and sell it today you would earn a total of 5,400 from holding WPP PLC or generate 6.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Bell Food Group vs. WPP PLC
Performance |
| Timeline |
| Bell Food Group |
| WPP PLC |
Bell Food and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bell Food and WPP PLC
The main advantage of trading using opposite Bell Food and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bell Food 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.| Bell Food vs. Samsung Electronics Co | Bell Food vs. Samsung Electronics Co | Bell Food vs. Hyundai Motor | Bell Food vs. Reliance Industries Ltd |
| WPP PLC vs. Toyota Motor Corp | WPP PLC vs. SoftBank Group Corp | WPP PLC vs. Fannie Mae | WPP PLC vs. Panasonic Corp |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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