Correlation Between Easy Software and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Easy Software 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 Easy Software and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Easy Software AG and WPP PLC, you can compare the effects of market volatilities on Easy Software 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 Easy Software with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Easy Software and WPP PLC.
Diversification Opportunities for Easy Software and WPP PLC
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Easy and WPP is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Easy Software AG and WPP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC and Easy Software 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 Easy Software AG 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 Easy Software i.e., Easy Software and WPP PLC go up and down completely randomly.
Pair Corralation between Easy Software and WPP PLC
Assuming the 90 days trading horizon Easy Software AG is expected to generate 5.91 times more return on investment than WPP PLC. However, Easy Software is 5.91 times more volatile than WPP PLC. It trades about 0.28 of its potential returns per unit of risk. WPP PLC is currently generating about -0.53 per unit of risk. If you would invest 1,520 in Easy Software AG on October 9, 2024 and sell it today you would earn a total of 280.00 from holding Easy Software AG or generate 18.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Easy Software AG vs. WPP PLC
Performance |
| Timeline |
| Easy Software AG |
| WPP PLC |
Easy Software and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Easy Software and WPP PLC
The main advantage of trading using opposite Easy Software and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Easy Software 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.| Easy Software vs. Salesforce | Easy Software vs. Rocket Internet SE | Easy Software vs. Superior Plus Corp | Easy Software vs. NMI Holdings |
| WPP PLC vs. Sumitomo Rubber Industries | WPP PLC vs. Rayonier Advanced Materials | WPP PLC vs. Linedata Services SA | WPP PLC vs. Cass Information Systems |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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