Correlation Between WPP PLC and Steel Connect
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Steel Connect 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 Steel Connect 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 Steel Connect, you can compare the effects of market volatilities on WPP PLC and Steel Connect 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 Steel Connect. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Steel Connect.
Diversification Opportunities for WPP PLC and Steel Connect
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between WPP and Steel is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Steel Connect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Connect 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 Steel Connect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Connect has no effect on the direction of WPP PLC i.e., WPP PLC and Steel Connect go up and down completely randomly.
Pair Corralation between WPP PLC and Steel Connect
Considering the 90-day investment horizon WPP PLC ADR is expected to generate 0.49 times more return on investment than Steel Connect. However, WPP PLC ADR is 2.06 times less risky than Steel Connect. It trades about -0.03 of its potential returns per unit of risk. Steel Connect is currently generating about -0.02 per unit of risk. If you would invest 5,385 in WPP PLC ADR on August 28, 2024 and sell it today you would lose (65.00) from holding WPP PLC ADR or give up 1.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WPP PLC ADR vs. Steel Connect
Performance |
| Timeline |
| WPP PLC ADR |
| Steel Connect |
WPP PLC and Steel Connect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Steel Connect
The main advantage of trading using opposite WPP PLC and Steel Connect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Steel Connect 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 Steel Connect will offset losses from the drop in Steel Connect's long position.The idea behind WPP PLC ADR and Steel Connect 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.| Steel Connect vs. Baosheng Media Group | Steel Connect vs. Impact Fusion International | Steel Connect vs. Mirriad Advertising plc | Steel Connect vs. CyberAgent ADR |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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