Correlation Between WPP PLC and Victorias Secret
Can any of the company-specific risk be diversified away by investing in both WPP PLC and Victorias Secret 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 Victorias Secret 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 Victorias Secret Co, you can compare the effects of market volatilities on WPP PLC and Victorias Secret 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 Victorias Secret. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Victorias Secret.
Diversification Opportunities for WPP PLC and Victorias Secret
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WPP and Victorias is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Victorias Secret Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victorias Secret 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 Victorias Secret. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victorias Secret has no effect on the direction of WPP PLC i.e., WPP PLC and Victorias Secret go up and down completely randomly.
Pair Corralation between WPP PLC and Victorias Secret
Considering the 90-day investment horizon WPP PLC is expected to generate 7.61 times less return on investment than Victorias Secret. But when comparing it to its historical volatility, WPP PLC ADR is 1.85 times less risky than Victorias Secret. It trades about 0.1 of its potential returns per unit of risk. Victorias Secret Co is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 3,151 in Victorias Secret Co on September 2, 2024 and sell it today you would earn a total of 733.00 from holding Victorias Secret Co or generate 23.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WPP PLC ADR vs. Victorias Secret Co
Performance |
| Timeline |
| WPP PLC ADR |
| Victorias Secret |
WPP PLC and Victorias Secret Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and Victorias Secret
The main advantage of trading using opposite WPP PLC and Victorias Secret positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Victorias Secret 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 Victorias Secret will offset losses from the drop in Victorias Secret's long position.The idea behind WPP PLC ADR and Victorias Secret Co 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.| Victorias Secret vs. Ross Stores | Victorias Secret vs. Childrens Place | Victorias Secret vs. Buckle Inc | Victorias Secret vs. Guess Inc |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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