Correlation Between WPP PLC and Enersys
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Enersys 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 Enersys 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 Enersys, you can compare the effects of market volatilities on WPP PLC and Enersys 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 Enersys. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Enersys.
Diversification Opportunities for WPP PLC and Enersys
Good diversification
The 3 months correlation between WPP and Enersys is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Enersys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersys 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 Enersys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enersys has no effect on the direction of WPP PLC i.e., WPP PLC and Enersys go up and down completely randomly.
Pair Corralation between WPP PLC and Enersys
Considering the 90-day investment horizon WPP PLC is expected to generate 1.39 times less return on investment than Enersys. But when comparing it to its historical volatility, WPP PLC ADR is 1.23 times less risky than Enersys. It trades about 0.03 of its potential returns per unit of risk. Enersys is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,711 in Enersys on September 3, 2024 and sell it today you would earn a total of 1,955 from holding Enersys or generate 25.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WPP PLC ADR vs. Enersys
Performance |
| Timeline |
| WPP PLC ADR |
| Enersys |
WPP PLC and Enersys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Enersys
The main advantage of trading using opposite WPP PLC and Enersys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Enersys 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 Enersys will offset losses from the drop in Enersys' long position.The idea behind WPP PLC ADR and Enersys 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.| Enersys vs. Advanced Energy Industries | Enersys vs. Hubbell | Enersys vs. Acuity Brands | Enersys vs. Kimball Electronics |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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