Correlation Between Cimpress and WPP PLC

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

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

Diversification Opportunities for Cimpress and WPP PLC

0.66

Correlation Coefficient

Cimpress  WPP PLC

Poor diversification

The 3 months correlation between Cimpress and WPP is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cimpress NV 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 Cimpress 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 Cimpress NV 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 Cimpress i.e., Cimpress and WPP PLC go up and down completely randomly.

Pair Corralation between Cimpress and WPP PLC

Given the investment horizon of 90 days Cimpress NV is expected to under-perform the WPP PLC. In addition to that, Cimpress is 1.2 times more volatile than WPP PLC ADR. It trades about -0.24 of its total potential returns per unit of risk. WPP PLC ADR is currently generating about -0.17 per unit of volatility. If you would invest  5,136  in WPP PLC ADR on December 28, 2024 and sell it today you would lose (1,250) from holding WPP PLC ADR or give up 24.34% of portfolio value over 90 days.

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

Cimpress NV  vs.  WPP PLC ADR

Cimpress NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cimpress NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Cimpress and WPP PLC

The main advantage of trading using opposite Cimpress and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cimpress 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 Cimpress NV 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.