Correlation Between Aquagold International and WPP PLC

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

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

Diversification Opportunities for Aquagold International and WPP PLC

0.42

Correlation Coefficient

Aquagold International  WPP PLC

Very weak diversification

The 3 months correlation between Aquagold and WPP is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International 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 Aquagold International 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 Aquagold International 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 Aquagold International i.e., Aquagold International and WPP PLC go up and down completely randomly.

Pair Corralation between Aquagold International and WPP PLC

Given the investment horizon of 90 days Aquagold International is expected to generate 32.06 times more return on investment than WPP PLC. However, Aquagold International is 32.06 times more volatile than WPP PLC ADR. It trades about 0.05 of its potential returns per unit of risk. WPP PLC ADR is currently generating about -0.01 per unit of risk. If you would invest  17.00  in Aquagold International on October 12, 2024 and sell it today you would lose (16.96) from holding Aquagold International or give up 99.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Aquagold International  vs.  WPP PLC ADR

Aquagold International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquagold International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

WPP PLC ADR

Risk-Adjusted Performance

0 of 100

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 Aquagold International and WPP PLC

The main advantage of trading using opposite Aquagold International and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aquagold International 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 Aquagold International 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.