Correlation Between NYSE Composite and WPP Plc
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and WPP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and WPP plc, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of WPP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and WPP Plc.
Diversification Opportunities for NYSE Composite and WPP Plc
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and WPP is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and WPP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP plc and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and WPP Plc go up and down completely randomly.
Pair Corralation between NYSE Composite and WPP Plc
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.23 times more return on investment than WPP Plc. However, NYSE Composite is 4.44 times less risky than WPP Plc. It trades about 0.11 of its potential returns per unit of risk. WPP plc is currently generating about 0.02 per unit of risk. If you would invest 1,583,553 in NYSE Composite on August 28, 2024 and sell it today you would earn a total of 438,483 from holding NYSE Composite or generate 27.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 59.04% |
| Values | Daily Returns |
NYSE Composite vs. WPP plc
Performance |
| Timeline |
NYSE Composite and WPP Plc Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
WPP plc
Pair trading matchups for WPP Plc
Pair Trading with NYSE Composite and WPP Plc
The main advantage of trading using opposite NYSE Composite and WPP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| WPP Plc vs. Ziff Davis | WPP Plc vs. Omnicom Group | WPP Plc vs. Interpublic Group of | WPP Plc vs. Townsquare Media |
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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