Correlation Between WPP Plc and INEO Tech

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Can any of the company-specific risk be diversified away by investing in both WPP Plc and INEO Tech 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 INEO Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WPP plc and INEO Tech Corp, you can compare the effects of market volatilities on WPP Plc and INEO Tech 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 INEO Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP Plc and INEO Tech.

Diversification Opportunities for WPP Plc and INEO Tech

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between WPP and INEO is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding WPP plc and INEO Tech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INEO Tech 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 are associated (or correlated) with INEO Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INEO Tech Corp has no effect on the direction of WPP Plc i.e., WPP Plc and INEO Tech go up and down completely randomly.

Pair Corralation between WPP Plc and INEO Tech

Assuming the 90 days horizon WPP plc is expected to generate 1.14 times more return on investment than INEO Tech. However, WPP Plc is 1.14 times more volatile than INEO Tech Corp. It trades about 0.1 of its potential returns per unit of risk. INEO Tech Corp is currently generating about -0.26 per unit of risk. If you would invest  1,069  in WPP plc on September 13, 2024 and sell it today you would earn a total of  51.00  from holding WPP plc or generate 4.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

WPP plc  vs.  INEO Tech Corp

 Performance 
       Timeline  
WPP plc 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in WPP plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, WPP Plc reported solid returns over the last few months and may actually be approaching a breakup point.
INEO Tech Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days INEO Tech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

WPP Plc and INEO Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WPP Plc and INEO Tech

The main advantage of trading using opposite WPP Plc and INEO Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP Plc position performs unexpectedly, INEO Tech 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 INEO Tech will offset losses from the drop in INEO Tech's long position.
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The idea behind WPP plc and INEO Tech 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.
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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