Correlation Between WPP PLC and Publicis Groupe

Can any of the company-specific risk be diversified away by investing in both WPP PLC and Publicis Groupe 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 Publicis Groupe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WPP PLC and Publicis Groupe SA, you can compare the effects of market volatilities on WPP PLC and Publicis Groupe 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 Publicis Groupe. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Publicis Groupe.

Diversification Opportunities for WPP PLC and Publicis Groupe

0.89

Correlation Coefficient

WPP PLC  Publicis Groupe

Very poor diversification

The 3 months correlation between WPP and Publicis is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC and Publicis Groupe SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Publicis Groupe SA 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 Publicis Groupe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Publicis Groupe SA has no effect on the direction of WPP PLC i.e., WPP PLC and Publicis Groupe go up and down completely randomly.

Pair Corralation between WPP PLC and Publicis Groupe

Assuming the 90 days horizon WPP PLC is expected to under-perform the Publicis Groupe. In addition to that, WPP PLC is 1.52 times more volatile than Publicis Groupe SA. It trades about -0.18 of its total potential returns per unit of risk. Publicis Groupe SA is currently generating about -0.1 per unit of volatility. If you would invest  10,225  in Publicis Groupe SA on December 25, 2024 and sell it today you would lose (985.00) from holding Publicis Groupe SA or give up 9.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

WPP PLC  vs.  Publicis Groupe SA

WPP PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days WPP PLC 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Publicis Groupe SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Publicis Groupe SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with WPP PLC and Publicis Groupe

The main advantage of trading using opposite WPP PLC and Publicis Groupe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC position performs unexpectedly, Publicis Groupe 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 Publicis Groupe will offset losses from the drop in Publicis Groupe's long position.

The idea behind WPP PLC and Publicis Groupe SA 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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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.