Correlation Between Brinker International and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Brinker 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 Brinker 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 Brinker International and WPP PLC ADR, you can compare the effects of market volatilities on Brinker 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 Brinker International with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinker International and WPP PLC.
Diversification Opportunities for Brinker International and WPP PLC
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Brinker and WPP is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Brinker 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 Brinker 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 Brinker 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 Brinker International i.e., Brinker International and WPP PLC go up and down completely randomly.
Pair Corralation between Brinker International and WPP PLC
Assuming the 90 days horizon Brinker International is expected to generate 1.76 times more return on investment than WPP PLC. However, Brinker International is 1.76 times more volatile than WPP PLC ADR. It trades about 0.12 of its potential returns per unit of risk. WPP PLC ADR is currently generating about 0.03 per unit of risk. If you would invest 2,980 in Brinker International on September 24, 2024 and sell it today you would earn a total of 9,720 from holding Brinker International or generate 326.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Brinker International vs. WPP PLC ADR
Performance |
Timeline |
Brinker International |
WPP PLC ADR |
Brinker International and WPP PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Brinker International and WPP PLC
The main advantage of trading using opposite Brinker International and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinker 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.Brinker International vs. TOREX SEMICONDUCTOR LTD | Brinker International vs. KIMBALL ELECTRONICS | Brinker International vs. Nordic Semiconductor ASA | Brinker International vs. Methode Electronics |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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