Correlation Between WPP PLC and RMG Acquisition
Can any of the company-specific risk be diversified away by investing in both WPP PLC and RMG Acquisition 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 RMG Acquisition 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 RMG Acquisition Corp, you can compare the effects of market volatilities on WPP PLC and RMG Acquisition 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 RMG Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and RMG Acquisition.
Diversification Opportunities for WPP PLC and RMG Acquisition
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between WPP and RMG is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and RMG Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMG Acquisition Corp 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 RMG Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMG Acquisition Corp has no effect on the direction of WPP PLC i.e., WPP PLC and RMG Acquisition go up and down completely randomly.
Pair Corralation between WPP PLC and RMG Acquisition
Considering the 90-day investment horizon WPP PLC ADR is expected to generate 1.33 times more return on investment than RMG Acquisition. However, WPP PLC is 1.33 times more volatile than RMG Acquisition Corp. It trades about 0.03 of its potential returns per unit of risk. RMG Acquisition Corp is currently generating about -0.01 per unit of risk. If you would invest 4,643 in WPP PLC ADR on August 30, 2024 and sell it today you would earn a total of 728.00 from holding WPP PLC ADR or generate 15.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 77.78% |
| Values | Daily Returns |
WPP PLC ADR vs. RMG Acquisition Corp
Performance |
| Timeline |
| WPP PLC ADR |
| RMG Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
WPP PLC and RMG Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and RMG Acquisition
The main advantage of trading using opposite WPP PLC and RMG Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, RMG Acquisition 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 RMG Acquisition will offset losses from the drop in RMG Acquisition's long position.The idea behind WPP PLC ADR and RMG Acquisition Corp 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.| RMG Acquisition vs. First Watch Restaurant | RMG Acquisition vs. RCI Hospitality Holdings | RMG Acquisition vs. Radcom | RMG Acquisition vs. Sphere Entertainment Co |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |