Correlation Between WPP SCANGROUP and KENGEN PLC

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Can any of the company-specific risk be diversified away by investing in both WPP SCANGROUP and KENGEN 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 WPP SCANGROUP and KENGEN PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WPP SCANGROUP PLC and KENGEN PLC, you can compare the effects of market volatilities on WPP SCANGROUP and KENGEN 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 WPP SCANGROUP with a short position of KENGEN PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP SCANGROUP and KENGEN PLC.

Diversification Opportunities for WPP SCANGROUP and KENGEN PLC

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between WPP and KENGEN is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding WPP SCANGROUP PLC and KENGEN PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KENGEN PLC and WPP SCANGROUP 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 WPP SCANGROUP PLC are associated (or correlated) with KENGEN PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KENGEN PLC has no effect on the direction of WPP SCANGROUP i.e., WPP SCANGROUP and KENGEN PLC go up and down completely randomly.

Pair Corralation between WPP SCANGROUP and KENGEN PLC

Assuming the 90 days trading horizon WPP SCANGROUP PLC is expected to generate 1.93 times more return on investment than KENGEN PLC. However, WPP SCANGROUP is 1.93 times more volatile than KENGEN PLC. It trades about 0.3 of its potential returns per unit of risk. KENGEN PLC is currently generating about 0.24 per unit of risk. If you would invest  251.00  in WPP SCANGROUP PLC on November 3, 2024 and sell it today you would earn a total of  81.00  from holding WPP SCANGROUP PLC or generate 32.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

WPP SCANGROUP PLC  vs.  KENGEN PLC

 Performance 
       Timeline  
WPP SCANGROUP PLC 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in WPP SCANGROUP PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, WPP SCANGROUP demonstrated solid returns over the last few months and may actually be approaching a breakup point.
KENGEN PLC 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in KENGEN PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, KENGEN PLC may actually be approaching a critical reversion point that can send shares even higher in March 2025.

WPP SCANGROUP and KENGEN PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WPP SCANGROUP and KENGEN PLC

The main advantage of trading using opposite WPP SCANGROUP and KENGEN PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP SCANGROUP position performs unexpectedly, KENGEN 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 KENGEN PLC will offset losses from the drop in KENGEN PLC's long position.
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The idea behind WPP SCANGROUP PLC and KENGEN PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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