Correlation Between WPP PLC and MSAD INSURANCE
Can any of the company-specific risk be diversified away by investing in both WPP PLC and MSAD INSURANCE 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 MSAD INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WPP PLC ADR and MSAD INSURANCE, you can compare the effects of market volatilities on WPP PLC and MSAD INSURANCE 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 MSAD INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and MSAD INSURANCE.
Diversification Opportunities for WPP PLC and MSAD INSURANCE
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WPP and MSAD is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and MSAD INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSAD INSURANCE 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 ADR are associated (or correlated) with MSAD INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSAD INSURANCE has no effect on the direction of WPP PLC i.e., WPP PLC and MSAD INSURANCE go up and down completely randomly.
Pair Corralation between WPP PLC and MSAD INSURANCE
Assuming the 90 days trading horizon WPP PLC ADR is expected to generate 1.05 times more return on investment than MSAD INSURANCE. However, WPP PLC is 1.05 times more volatile than MSAD INSURANCE. It trades about 0.26 of its potential returns per unit of risk. MSAD INSURANCE is currently generating about 0.02 per unit of risk. If you would invest 4,480 in WPP PLC ADR on September 13, 2024 and sell it today you would earn a total of 820.00 from holding WPP PLC ADR or generate 18.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
WPP PLC ADR vs. MSAD INSURANCE
Performance |
| Timeline |
| WPP PLC ADR |
| MSAD INSURANCE |
WPP PLC and MSAD INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and MSAD INSURANCE
The main advantage of trading using opposite WPP PLC and MSAD INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, MSAD INSURANCE 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 MSAD INSURANCE will offset losses from the drop in MSAD INSURANCE's long position.| WPP PLC vs. MSAD INSURANCE | WPP PLC vs. Zurich Insurance Group | WPP PLC vs. Singapore Reinsurance | WPP PLC vs. International Consolidated Airlines |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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