Correlation Between WPP PLC and Talanx AG
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Talanx AG 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 WPP PLC and Talanx AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WPP PLC and Talanx AG, you can compare the effects of market volatilities on WPP PLC and Talanx AG 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 WPP PLC with a short position of Talanx AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Talanx AG.
Diversification Opportunities for WPP PLC and Talanx AG
Good diversification
The 3 months correlation between WPP and Talanx is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and WPP PLC 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 WPP PLC are associated (or correlated) with Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of WPP PLC i.e., WPP PLC and Talanx AG go up and down completely randomly.
Pair Corralation between WPP PLC and Talanx AG
Assuming the 90 days horizon WPP PLC is expected to generate 1.28 times more return on investment than Talanx AG. However, WPP PLC is 1.28 times more volatile than Talanx AG. It trades about 0.19 of its potential returns per unit of risk. Talanx AG is currently generating about 0.03 per unit of risk. If you would invest 836.00 in WPP PLC on September 2, 2024 and sell it today you would earn a total of 184.00 from holding WPP PLC or generate 22.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WPP PLC vs. Talanx AG
Performance |
| Timeline |
| WPP PLC |
| Talanx AG |
WPP PLC and Talanx AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Talanx AG
The main advantage of trading using opposite WPP PLC and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Talanx AG 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 Talanx AG will offset losses from the drop in Talanx AG's long position.| WPP PLC vs. USWE SPORTS AB | WPP PLC vs. Columbia Sportswear | WPP PLC vs. Sporttotal AG | WPP PLC vs. Vulcan Materials |
| Talanx AG vs. GameStop Corp | Talanx AG vs. Spirent Communications plc | Talanx AG vs. International Game Technology | Talanx AG vs. PENN NATL GAMING |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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