Correlation Between Central Asia and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Central Asia 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 Central Asia and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Asia Metals and WPP PLC, you can compare the effects of market volatilities on Central Asia 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 Central Asia with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Asia and WPP PLC.
Diversification Opportunities for Central Asia and WPP PLC
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Central and WPP is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and WPP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC and Central Asia 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 Central Asia Metals 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 Central Asia i.e., Central Asia and WPP PLC go up and down completely randomly.
Pair Corralation between Central Asia and WPP PLC
Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the WPP PLC. In addition to that, Central Asia is 1.32 times more volatile than WPP PLC. It trades about -0.1 of its total potential returns per unit of risk. WPP PLC is currently generating about 0.06 per unit of volatility. If you would invest 77,643 in WPP PLC on September 1, 2024 and sell it today you would earn a total of 8,277 from holding WPP PLC or generate 10.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.23% |
| Values | Daily Returns |
Central Asia Metals vs. WPP PLC
Performance |
| Timeline |
| Central Asia Metals |
| WPP PLC |
Central Asia and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Asia and WPP PLC
The main advantage of trading using opposite Central Asia and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Asia 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.| Central Asia vs. Bisichi Mining PLC | Central Asia vs. McEwen Mining | Central Asia vs. Coeur Mining | Central Asia vs. GoldMining |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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