Correlation Between Advantage Solutions and WPP PLC

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

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

Diversification Opportunities for Advantage Solutions and WPP PLC

0.91

Correlation Coefficient

Advantage Solutions  WPP PLC

Almost no diversification

The 3 months correlation between Advantage and WPP is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Solutions and WPP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC ADR and Advantage Solutions 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 Advantage Solutions 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 ADR has no effect on the direction of Advantage Solutions i.e., Advantage Solutions and WPP PLC go up and down completely randomly.

Pair Corralation between Advantage Solutions and WPP PLC

Considering the 90-day investment horizon Advantage Solutions is expected to under-perform the WPP PLC. In addition to that, Advantage Solutions is 2.13 times more volatile than WPP PLC ADR. It trades about -0.14 of its total potential returns per unit of risk. WPP PLC ADR is currently generating about -0.11 per unit of volatility. If you would invest  5,371  in WPP PLC ADR on November 27, 2024 and sell it today you would lose (521.00) from holding WPP PLC ADR or give up 9.7% of portfolio value over 90 days.

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

Advantage Solutions  vs.  WPP PLC ADR

Advantage Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advantage Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

WPP PLC ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days WPP PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Advantage Solutions and WPP PLC

The main advantage of trading using opposite Advantage Solutions and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantage Solutions 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 Advantage Solutions and WPP PLC ADR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.