Correlation Between WPP PLC and Sandstorm Gold
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Sandstorm Gold 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 Sandstorm Gold 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 Sandstorm Gold Ltd, you can compare the effects of market volatilities on WPP PLC and Sandstorm Gold 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 Sandstorm Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Sandstorm Gold.
Diversification Opportunities for WPP PLC and Sandstorm Gold
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WPP and Sandstorm is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold 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 Sandstorm Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandstorm Gold has no effect on the direction of WPP PLC i.e., WPP PLC and Sandstorm Gold go up and down completely randomly.
Pair Corralation between WPP PLC and Sandstorm Gold
Considering the 90-day investment horizon WPP PLC ADR is expected to generate 0.49 times more return on investment than Sandstorm Gold. However, WPP PLC ADR is 2.05 times less risky than Sandstorm Gold. It trades about 0.1 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about -0.07 per unit of risk. If you would invest 5,324 in WPP PLC ADR on September 2, 2024 and sell it today you would earn a total of 143.00 from holding WPP PLC ADR or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WPP PLC ADR vs. Sandstorm Gold Ltd
Performance |
| Timeline |
| WPP PLC ADR |
| Sandstorm Gold |
WPP PLC and Sandstorm Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Sandstorm Gold
The main advantage of trading using opposite WPP PLC and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Sandstorm Gold 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 Sandstorm Gold will offset losses from the drop in Sandstorm Gold's long position.The idea behind WPP PLC ADR and Sandstorm Gold Ltd 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.| Sandstorm Gold vs. Fortitude Gold Corp | Sandstorm Gold vs. New Gold | Sandstorm Gold vs. Galiano Gold | Sandstorm Gold vs. GoldMining |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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