Correlation Between WPP PLC and Amgen
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Amgen 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 Amgen 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 Amgen Inc, you can compare the effects of market volatilities on WPP PLC and Amgen 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 Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Amgen.
Diversification Opportunities for WPP PLC and Amgen
Excellent diversification
The 3 months correlation between WPP and Amgen is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc 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 Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of WPP PLC i.e., WPP PLC and Amgen go up and down completely randomly.
Pair Corralation between WPP PLC and Amgen
Considering the 90-day investment horizon WPP PLC ADR is expected to generate 0.89 times more return on investment than Amgen. However, WPP PLC ADR is 1.13 times less risky than Amgen. It trades about 0.06 of its potential returns per unit of risk. Amgen Inc is currently generating about -0.3 per unit of risk. If you would invest 5,148 in WPP PLC ADR on September 22, 2024 and sell it today you would earn a total of 81.00 from holding WPP PLC ADR or generate 1.57% 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. Amgen Inc
Performance |
| Timeline |
| WPP PLC ADR |
| Amgen Inc |
WPP PLC and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Amgen
The main advantage of trading using opposite WPP PLC and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Amgen 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 Amgen will offset losses from the drop in Amgen's long position.The idea behind WPP PLC ADR and Amgen Inc 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.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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