Correlation Between JCDecaux and WPP PLC

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

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

Diversification Opportunities for JCDecaux and WPP PLC

-0.69

Correlation Coefficient

JCDecaux  WPP PLC

Excellent diversification

The 3 months correlation between JCDecaux and WPP is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding JCDecaux SA 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 JCDecaux 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 JCDecaux SA 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 JCDecaux i.e., JCDecaux and WPP PLC go up and down completely randomly.

Pair Corralation between JCDecaux and WPP PLC

Assuming the 90 days horizon JCDecaux SA is expected to generate 0.77 times more return on investment than WPP PLC. However, JCDecaux SA is 1.3 times less risky than WPP PLC. It trades about 0.11 of its potential returns per unit of risk. WPP PLC ADR is currently generating about -0.78 per unit of risk. If you would invest  1,499  in JCDecaux SA on October 13, 2024 and sell it today you would earn a total of  27.00  from holding JCDecaux SA or generate 1.8% return on investment over 90 days.

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

JCDecaux SA  vs.  WPP PLC ADR

JCDecaux SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JCDecaux SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. 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 JCDecaux and WPP PLC

The main advantage of trading using opposite JCDecaux and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JCDecaux 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 JCDecaux SA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.