Correlation Between ADRIATIC METALS and WPP PLC

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

By analyzing existing cross correlation between ADRIATIC METALS LS 013355 and WPP PLC, you can compare the effects of market volatilities on ADRIATIC METALS and WPP PLC 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 ADRIATIC METALS with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADRIATIC METALS and WPP PLC.

Diversification Opportunities for ADRIATIC METALS and WPP PLC

0.45

Correlation Coefficient

ADRIATIC METALS  WPP PLC

Very weak diversification

The 3 months correlation between ADRIATIC and WPP is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ADRIATIC METALS LS 013355 and WPP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC and ADRIATIC METALS 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 ADRIATIC METALS LS 013355 are associated (or correlated) with WPP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP PLC has no effect on the direction of ADRIATIC METALS i.e., ADRIATIC METALS and WPP PLC go up and down completely randomly.

Pair Corralation between ADRIATIC METALS and WPP PLC

Assuming the 90 days trading horizon ADRIATIC METALS LS 013355 is expected to generate 1.4 times more return on investment than WPP PLC. However, ADRIATIC METALS is 1.4 times more volatile than WPP PLC. It trades about -0.19 of its potential returns per unit of risk. WPP PLC is currently generating about -0.82 per unit of risk. If you would invest  238.00  in ADRIATIC METALS LS 013355 on October 15, 2024 and sell it today you would lose (16.00) from holding ADRIATIC METALS LS 013355 or give up 6.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ADRIATIC METALS LS 013355  vs.  WPP PLC

ADRIATIC METALS LS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADRIATIC METALS LS 013355 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.

WPP PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WPP PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WPP PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ADRIATIC METALS and WPP PLC

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

The idea behind ADRIATIC METALS LS 013355 and WPP PLC 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.