Correlation Between WPP PLC and Tatton Asset
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Tatton Asset 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 Tatton Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WPP PLC and Tatton Asset Management, you can compare the effects of market volatilities on WPP PLC and Tatton Asset 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 Tatton Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Tatton Asset.
Diversification Opportunities for WPP PLC and Tatton Asset
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between WPP and Tatton is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC and Tatton Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tatton Asset Management 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 Tatton Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tatton Asset Management has no effect on the direction of WPP PLC i.e., WPP PLC and Tatton Asset go up and down completely randomly.
Pair Corralation between WPP PLC and Tatton Asset
Assuming the 90 days trading horizon WPP PLC is expected to generate 1.21 times more return on investment than Tatton Asset. However, WPP PLC is 1.21 times more volatile than Tatton Asset Management. It trades about 0.11 of its potential returns per unit of risk. Tatton Asset Management is currently generating about -0.07 per unit of risk. If you would invest 85,160 in WPP PLC on September 12, 2024 and sell it today you would earn a total of 2,740 from holding WPP PLC or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WPP PLC vs. Tatton Asset Management
Performance |
| Timeline |
| WPP PLC |
| Tatton Asset Management |
WPP PLC and Tatton Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Tatton Asset
The main advantage of trading using opposite WPP PLC and Tatton Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Tatton Asset 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 Tatton Asset will offset losses from the drop in Tatton Asset's long position.| WPP PLC vs. Roebuck Food Group | WPP PLC vs. Evolution Gaming Group | WPP PLC vs. Zoom Video Communications | WPP PLC vs. Bell Food Group |
| Tatton Asset vs. Bytes Technology | Tatton Asset vs. DXC Technology Co | Tatton Asset vs. Dalata Hotel Group | Tatton Asset vs. Sabien Technology Group |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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