Correlation Between Apple and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and WPP PLC, you can compare the effects of market volatilities on Apple 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 Apple with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and WPP PLC.
Diversification Opportunities for Apple and WPP PLC
Poor diversification
The 3 months correlation between Apple and WPP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and WPP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC and Apple 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 Apple Inc 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 Apple i.e., Apple and WPP PLC go up and down completely randomly.
Pair Corralation between Apple and WPP PLC
Assuming the 90 days trading horizon Apple is expected to generate 1.11 times less return on investment than WPP PLC. But when comparing it to its historical volatility, Apple Inc is 1.08 times less risky than WPP PLC. It trades about 0.07 of its potential returns per unit of risk. WPP PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 802.00 in WPP PLC on September 2, 2024 and sell it today you would earn a total of 228.00 from holding WPP PLC or generate 28.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. WPP PLC
Performance |
| Timeline |
| Apple Inc |
| WPP PLC |
Apple and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and WPP PLC
The main advantage of trading using opposite Apple and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. British American Tobacco | Apple vs. TAL Education Group | Apple vs. G8 EDUCATION | Apple vs. Laureate Education |
| WPP PLC vs. CHIBA BANK | WPP PLC vs. National Bank Holdings | WPP PLC vs. SOFTBANK P ADR | WPP PLC vs. Corporate Office Properties |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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