Correlation Between FIREWEED METALS and WPP PLC

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

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

Diversification Opportunities for FIREWEED METALS and WPP PLC

-0.02

Correlation Coefficient

FIREWEED METALS  WPP PLC

Good diversification

The 3 months correlation between FIREWEED and WPP is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding FIREWEED METALS P and WPP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC and FIREWEED METALS 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 FIREWEED METALS P 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 has no effect on the direction of FIREWEED METALS i.e., FIREWEED METALS and WPP PLC go up and down completely randomly.

Pair Corralation between FIREWEED METALS and WPP PLC

Assuming the 90 days horizon FIREWEED METALS P is expected to generate 1.32 times more return on investment than WPP PLC. However, FIREWEED METALS is 1.32 times more volatile than WPP PLC. It trades about 0.1 of its potential returns per unit of risk. WPP PLC is currently generating about -0.2 per unit of risk. If you would invest  93.00  in FIREWEED METALS P on December 20, 2024 and sell it today you would earn a total of  17.00  from holding FIREWEED METALS P or generate 18.28% return on investment over 90 days.

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

FIREWEED METALS P  vs.  WPP PLC

FIREWEED METALS P

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, FIREWEED METALS reported solid returns over the last few months and may actually be approaching a breakup point.

WPP PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days WPP PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with FIREWEED METALS and WPP PLC

The main advantage of trading using opposite FIREWEED METALS and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIREWEED METALS 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 FIREWEED METALS P and WPP PLC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.