Correlation Between WPP PLC and Emerald Expositions
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Emerald Expositions 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 Emerald Expositions 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 Emerald Expositions Events, you can compare the effects of market volatilities on WPP PLC and Emerald Expositions 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 Emerald Expositions. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Emerald Expositions.
Diversification Opportunities for WPP PLC and Emerald Expositions
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between WPP and Emerald is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Emerald Expositions Events in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Expositions 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 Emerald Expositions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Expositions has no effect on the direction of WPP PLC i.e., WPP PLC and Emerald Expositions go up and down completely randomly.
Pair Corralation between WPP PLC and Emerald Expositions
Considering the 90-day investment horizon WPP PLC ADR is expected to under-perform the Emerald Expositions. But the stock apears to be less risky and, when comparing its historical volatility, WPP PLC ADR is 1.65 times less risky than Emerald Expositions. The stock trades about -0.17 of its potential returns per unit of risk. The Emerald Expositions Events is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 459.00 in Emerald Expositions Events on October 24, 2024 and sell it today you would earn a total of 8.00 from holding Emerald Expositions Events or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WPP PLC ADR vs. Emerald Expositions Events
Performance |
| Timeline |
| WPP PLC ADR |
| Emerald Expositions |
WPP PLC and Emerald Expositions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Emerald Expositions
The main advantage of trading using opposite WPP PLC and Emerald Expositions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Emerald Expositions 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 Emerald Expositions will offset losses from the drop in Emerald Expositions' long position.The idea behind WPP PLC ADR and Emerald Expositions Events 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.| Emerald Expositions vs. Mirriad Advertising plc | Emerald Expositions vs. INEO Tech Corp | Emerald Expositions vs. Marchex | Emerald Expositions vs. Innovid Corp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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