Correlation Between WPP PLC and Advantage Solutions
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Advantage Solutions 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 Advantage Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WPP PLC ADR and Advantage Solutions, you can compare the effects of market volatilities on WPP PLC and Advantage Solutions 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 Advantage Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Advantage Solutions.
Diversification Opportunities for WPP PLC and Advantage Solutions
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WPP and Advantage is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions 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 ADR are associated (or correlated) with Advantage Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Solutions has no effect on the direction of WPP PLC i.e., WPP PLC and Advantage Solutions go up and down completely randomly.
Pair Corralation between WPP PLC and Advantage Solutions
Considering the 90-day investment horizon WPP PLC is expected to generate 4.06 times less return on investment than Advantage Solutions. But when comparing it to its historical volatility, WPP PLC ADR is 2.43 times less risky than Advantage Solutions. It trades about 0.03 of its potential returns per unit of risk. Advantage Solutions is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 217.00 in Advantage Solutions on August 30, 2024 and sell it today you would earn a total of 134.00 from holding Advantage Solutions or generate 61.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WPP PLC ADR vs. Advantage Solutions
Performance |
| Timeline |
| WPP PLC ADR |
| Advantage Solutions |
WPP PLC and Advantage Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Advantage Solutions
The main advantage of trading using opposite WPP PLC and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Advantage Solutions 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 Advantage Solutions will offset losses from the drop in Advantage Solutions' long position.The idea behind WPP PLC ADR and Advantage Solutions 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.| Advantage Solutions vs. Criteo Sa | Advantage Solutions vs. Deluxe | Advantage Solutions vs. Emerald Expositions Events | Advantage Solutions vs. Marchex |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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