Correlation Between Safety Insurance and WPP SP
Can any of the company-specific risk be diversified away by investing in both Safety Insurance and WPP SP 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 Safety Insurance and WPP SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Safety Insurance Group and WPP SP ADR, you can compare the effects of market volatilities on Safety Insurance and WPP SP 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 Safety Insurance with a short position of WPP SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and WPP SP.
Diversification Opportunities for Safety Insurance and WPP SP
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Safety and WPP is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and WPP SP ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP SP ADR and Safety Insurance 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 Safety Insurance Group are associated (or correlated) with WPP SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP SP ADR has no effect on the direction of Safety Insurance i.e., Safety Insurance and WPP SP go up and down completely randomly.
Pair Corralation between Safety Insurance and WPP SP
Assuming the 90 days horizon Safety Insurance Group is expected to generate 1.47 times more return on investment than WPP SP. However, Safety Insurance is 1.47 times more volatile than WPP SP ADR. It trades about 0.04 of its potential returns per unit of risk. WPP SP ADR is currently generating about 0.05 per unit of risk. If you would invest 8,009 in Safety Insurance Group on September 12, 2024 and sell it today you would earn a total of 91.00 from holding Safety Insurance Group or generate 1.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Safety Insurance Group vs. WPP SP ADR
Performance |
| Timeline |
| Safety Insurance |
| WPP SP ADR |
Safety Insurance and WPP SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safety Insurance and WPP SP
The main advantage of trading using opposite Safety Insurance and WPP SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance position performs unexpectedly, WPP SP 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 SP will offset losses from the drop in WPP SP's long position.| Safety Insurance vs. QBE Insurance Group | Safety Insurance vs. Insurance Australia Group | Safety Insurance vs. Superior Plus Corp | Safety Insurance vs. SIVERS SEMICONDUCTORS AB |
| WPP SP vs. LANDSEA GREEN MANAGEMENT | WPP SP vs. Corporate Travel Management | WPP SP vs. Jupiter Fund Management | WPP SP vs. CARSALESCOM |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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