Correlation Between Arrow Financial and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Arrow Financial 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 Arrow Financial and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Financial and WPP PLC ADR, you can compare the effects of market volatilities on Arrow Financial 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 Arrow Financial with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Financial and WPP PLC.
Diversification Opportunities for Arrow Financial and WPP PLC
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Arrow and WPP is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and WPP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC ADR and Arrow Financial 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 Arrow Financial 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 ADR has no effect on the direction of Arrow Financial i.e., Arrow Financial and WPP PLC go up and down completely randomly.
Pair Corralation between Arrow Financial and WPP PLC
Given the investment horizon of 90 days Arrow Financial is expected to under-perform the WPP PLC. In addition to that, Arrow Financial is 1.28 times more volatile than WPP PLC ADR. It trades about -0.14 of its total potential returns per unit of risk. WPP PLC ADR is currently generating about 0.15 per unit of volatility. If you would invest 4,653 in WPP PLC ADR on November 27, 2024 and sell it today you would earn a total of 169.00 from holding WPP PLC ADR or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow Financial vs. WPP PLC ADR
Performance |
| Timeline |
| Arrow Financial |
| WPP PLC ADR |
Arrow Financial and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Financial and WPP PLC
The main advantage of trading using opposite Arrow Financial and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Financial 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.| Arrow Financial vs. Heritage Commerce Corp | Arrow Financial vs. Westamerica Bancorporation | Arrow Financial vs. Heritage Financial | Arrow Financial vs. National Bankshares |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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