Correlation Between WPP PLC and Cornish Metals
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Cornish Metals 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 PLC and Cornish Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WPP PLC and Cornish Metals, you can compare the effects of market volatilities on WPP PLC and Cornish Metals 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 PLC with a short position of Cornish Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Cornish Metals.
Diversification Opportunities for WPP PLC and Cornish Metals
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WPP and Cornish is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC and Cornish Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornish Metals and WPP PLC 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 PLC are associated (or correlated) with Cornish Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornish Metals has no effect on the direction of WPP PLC i.e., WPP PLC and Cornish Metals go up and down completely randomly.
Pair Corralation between WPP PLC and Cornish Metals
Assuming the 90 days trading horizon WPP PLC is expected to generate 0.3 times more return on investment than Cornish Metals. However, WPP PLC is 3.31 times less risky than Cornish Metals. It trades about 0.14 of its potential returns per unit of risk. Cornish Metals is currently generating about -0.11 per unit of risk. If you would invest 82,820 in WPP PLC on September 2, 2024 and sell it today you would earn a total of 3,100 from holding WPP PLC or generate 3.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WPP PLC vs. Cornish Metals
Performance |
| Timeline |
| WPP PLC |
| Cornish Metals |
WPP PLC and Cornish Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Cornish Metals
The main advantage of trading using opposite WPP PLC and Cornish Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Cornish Metals 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 Cornish Metals will offset losses from the drop in Cornish Metals' long position.| WPP PLC vs. National Atomic Co | WPP PLC vs. Flutter Entertainment PLC | WPP PLC vs. Camellia Plc | WPP PLC vs. Marwyn Value Investors |
| Cornish Metals vs. Givaudan SA | Cornish Metals vs. Antofagasta PLC | Cornish Metals vs. Centamin PLC | Cornish Metals vs. Atalaya Mining |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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