Correlation Between WPP PLC and Skechers USA
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Skechers USA 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 Skechers USA 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 Skechers USA, you can compare the effects of market volatilities on WPP PLC and Skechers USA 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 Skechers USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Skechers USA.
Diversification Opportunities for WPP PLC and Skechers USA
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between WPP and Skechers is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA 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 Skechers USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skechers USA has no effect on the direction of WPP PLC i.e., WPP PLC and Skechers USA go up and down completely randomly.
Pair Corralation between WPP PLC and Skechers USA
Considering the 90-day investment horizon WPP PLC is expected to generate 2.17 times less return on investment than Skechers USA. But when comparing it to its historical volatility, WPP PLC ADR is 1.25 times less risky than Skechers USA. It trades about 0.04 of its potential returns per unit of risk. Skechers USA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,200 in Skechers USA on September 13, 2024 and sell it today you would earn a total of 2,825 from holding Skechers USA or generate 67.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
WPP PLC ADR vs. Skechers USA
Performance |
| Timeline |
| WPP PLC ADR |
| Skechers USA |
WPP PLC and Skechers USA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Skechers USA
The main advantage of trading using opposite WPP PLC and Skechers USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Skechers USA 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 Skechers USA will offset losses from the drop in Skechers USA's long position.The idea behind WPP PLC ADR and Skechers USA 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.| Skechers USA vs. Crocs Inc | Skechers USA vs. On Holding | Skechers USA vs. Nike Inc | Skechers USA vs. Designer Brands |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |