Correlation Between WPP PLC and Ameren Illinois
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Ameren Illinois 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 Ameren Illinois 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 Ameren Illinois, you can compare the effects of market volatilities on WPP PLC and Ameren Illinois 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 Ameren Illinois. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Ameren Illinois.
Diversification Opportunities for WPP PLC and Ameren Illinois
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between WPP and Ameren is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois 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 Ameren Illinois. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Illinois has no effect on the direction of WPP PLC i.e., WPP PLC and Ameren Illinois go up and down completely randomly.
Pair Corralation between WPP PLC and Ameren Illinois
Considering the 90-day investment horizon WPP PLC ADR is expected to under-perform the Ameren Illinois. In addition to that, WPP PLC is 1.06 times more volatile than Ameren Illinois. It trades about -0.39 of its total potential returns per unit of risk. Ameren Illinois is currently generating about 0.22 per unit of volatility. If you would invest 6,495 in Ameren Illinois on October 23, 2024 and sell it today you would earn a total of 405.00 from holding Ameren Illinois or generate 6.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
WPP PLC ADR vs. Ameren Illinois
Performance |
| Timeline |
| WPP PLC ADR |
| Ameren Illinois |
WPP PLC and Ameren Illinois Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Ameren Illinois
The main advantage of trading using opposite WPP PLC and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Ameren Illinois 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 Ameren Illinois will offset losses from the drop in Ameren Illinois' long position.The idea behind WPP PLC ADR and Ameren Illinois 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.| Ameren Illinois vs. Meli Hotels International | Ameren Illinois vs. Playa Hotels Resorts | Ameren Illinois vs. Chemours Co | Ameren Illinois vs. American Hotel Income |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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