Correlation Between ATT and WPP PLC
Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and WPP PLC ADR, you can compare the effects of market volatilities on ATT 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 ATT with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and WPP PLC.
Diversification Opportunities for ATT and WPP PLC
Poor diversification
The 3 months correlation between ATT and WPP is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and WPP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC ADR and ATT 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 ATT Inc 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 ADR has no effect on the direction of ATT i.e., ATT and WPP PLC go up and down completely randomly.
Pair Corralation between ATT and WPP PLC
Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.85 times more return on investment than WPP PLC. However, ATT Inc is 1.18 times less risky than WPP PLC. It trades about 0.17 of its potential returns per unit of risk. WPP PLC ADR is currently generating about 0.09 per unit of risk. If you would invest 1,620 in ATT Inc on August 27, 2024 and sell it today you would earn a total of 698.00 from holding ATT Inc or generate 43.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. WPP PLC ADR
Performance |
| Timeline |
| ATT Inc |
| WPP PLC ADR |
ATT and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and WPP PLC
The main advantage of trading using opposite ATT and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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.| ATT vs. Liberty Broadband Srs | ATT vs. Ribbon Communications | ATT vs. Liberty Broadband Srs | ATT vs. Shenandoah Telecommunications Co |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |